Webinar Transcript
This transcript has been lightly edited for clarity and to include links to materials provided in the presentation.
Slides 1-5 | Lauren Kallins, NCSL
OK, well, welcome everyone. Good afternoon and aloha. I see that we have several members from Hawaii joining us. We're thrilled you all are here. I'm Lauren Kallins I NCSL. I'm a senior legislative director on NCSL's federal team. And on behalf of the officers of our standing health and budgets and revenue committees, I am pleased to welcome you to part one of NCSL's webinar on federal Medicaid proposals.
I see that some of our officers have joined us today. Senator DeMario from Rhode Island, and Delegate Rohrbach from West Virginia, both vice chairs of our Standing Health Committee. I see Senator Tim Reed from South Dakota, co-chair of Budgets and Revenue. And if there are any others that I've missed, my apologies, but thank you for joining us and for your support.
So for any of you that may be new to NCSL, we are a bipartisan organization serving legislators and legislative staff in all 50 states, D.C. And the territories. And our mission is to support the legislative institution. And webinars like this are one of several ways in which we support our members. We also provide in-depth policy research, facilitate connections between NCSL members and with experts, provide tailored legislative trainings, represent you in DC, that's the team I sit on, and offer a variety of meetings during which members learn and exchange policy ideas. And we are very appreciative that so many of you have registered and are joining us for today's webinarwith so little lead time. That's not our normal MO. But given how quickly the federal landscape is changing and moving, we thought it important to share information with you as quickly as possible about the various federal Medicaid proposals that are under consideration, proposals that could have significant impacts on state budgets and Medicaid programs.
I mentioned that today is part one. We felt strongly that in order to have adequate time to cover the topics and to provide you with balanced and accurate information, and to have time to answer questions, that we needed to divide this into two parts. So today we're going to focus on two areas. One, proposals that would impact the way federal and state governments share responsibility for Medicaid program costs, referred to as the Federal Medical Assistance Percentage, aka the FMAP. And we will also be exploring proposals that would change the mechanisms that states use to finance the state's share of program expenses, often referred to as provider taxes.
NCSL Resource: Medicaid Financing 101
So next week for part two, we will cover several other proposals that are being talked about federally. These include, and this is a big one, per capita caps. This is a change that would dramatically impact the underlying financing system of Medicaid by converting all or part of the Medicaid program into a per capita cap funding structure. We're also going to discuss a variety of other issues, possibility of work requirements, what it would look like to try and eliminate fraud, waste, and abuse, the potential repeal of recently passed federal rules, and though not a Medicaid proposal, possibly the impact on states of the expiration of the enhanced health care marketplace subsidies. So we hope to also see you all next week.
I want to point out that both of these webinars are exclusively for NCSL members. There is no press and no private sector included on the registration. We will be recording the presentations today, but we will not record the question and answer, and that is by design to encourage questions and discussion.
So, the roadmap for today. I'm going to provide you a very brief update on the status of the current reforms that are being discussed at the federal level, then turn things over to my NCSL colleague, Kathryn Costanza, to provide an introduction to these reforms and the scope of their impact. Kathryn will then introduce you to our incredible expert panel, who will drill down into the details. And we will wrap it up with Q&A, and we ask that you put your questions in the chat, and we will respond to them at the end.
Slide 6 | Lauren Kallins, NCSL
I will leave most of the level setting about Medicaid to our panel. Medicaid is the largest health insurer in the US. It covers one in four Americans and 40% of births. It accounts for 30% of state budgets and is the fourth largest federal funding stream for school districts. Suffice it to say that changes to this program thus have the potential for enormous impacts on states.
Earlier this year, the House Budget Committee released a list of proposed reductions in federal funding in an array of programs, including Medicaid, that are up for consideration as Congress works through its budget reconciliation bill. We will be touching on most of the largest Medicaid proposals included in that list between today and next week. When the budget reconciliation bill passed last week, it included instructions to the various House committees regarding spending targets.
The instruction given to the Energy and Commerce Committee, which has jurisdiction over Medicaid, among other things, was to find $880 billion in reductions. This was by far the largest reduction target given to any of the committees. And I want to point out that the reconciliation bill does not specifically mention Medicaid or any other program for that matter. It was just a spending target. The devil is always in the details and it will be up to the Energy and Commerce Committee to figure this out.
So what are we hearing? In response to concerns about the proposals to cut Medicaid, the president has subsequently said that Medicaid will not be cut. During the campaign, he had mentioned that Social Security and Medicare would not be touched, but now he included Medicaid, with the exception of eliminating fraud, waste, and abuse. House Speaker Johnson is on record as saying that there will be no changes to per capita caps or to the FMAP.
However, Energy and Commerce Chair Guthrie has expressed support for changing the federal share, the FMAP, for the expansion population. And there seems to be growing support amongst House Republicans for distinguishing between the traditional Medicaid population and the expansion population. We expect the House committees to begin discussions next week and in the coming weeks.
The last thing I want to mention is that the Senate has also passed its own reconciliation bill that looks very different from the House bill. These bills will ultimately have to be reconciled, but for now, all eyes are on the House, and we will continue to share information with NCSL members as we get it. And with that, I'm going to stop there for the federal update portion and turn things over to Kathryn Costanza.
Slides 7-8 | Kathryn Costanza, NCSL
Hi, everyone, and thank you so much for being here. Thank you, Lauren. So now that we've gotten that wonderful overview from Lauren of where we are in the congressional budget process, there's obviously a lot we don't know. But let's dig into what we do know from the House budget proposal and what is being proposed there.
Before we do, though, we'd love to get a sense of who is in the audience with us and your level of understanding so that we can really tailor this presentation to your needs. So before we dig in, can you please enter into the chat your level of knowledge about the Medicaid program on a scale of 1 to 5? And a 1 would be you would like some assistance in understanding the difference between the Medicaid and Medicare programs. Three would mean that you're pretty grounded in the basics. So for purposes of this webinar, you may know what the federal match is or what a provider tax does at a high level. And level five level is you are a Medicaid director level. You know all the ins and outs of what's happening in your state, in which case I'm going to be directing questions to you at the end of this presentation.
All Jokes aside, it looks like we've got a high range of knowledgeability. Threes, fives, fours. Excellent. OK, great. Thank you all so much for sharing. Good to know who we have in the audience and how we can best help you. And before we get started, if anything in this webinar does spark more questions or if we're unable to cover a topic in particular detail given the time constraints, please reach out to me or Lauren directly. We can always share additional resources or more detailed explanations beyond what we're going to cover here today. And that is what we are here to do as an organization that serves state legislators and legislative staff.
Slide 9 | Kathryn Costanza, NCSL
So I'm not going to dig into Medicaid program basics in too much detailbecause we've got some fundamental knowledge, but the Medicaid program provides health coverage to people with low incomes. And we know that it is jointly funded and regulated by both the federal andterritorial governments. A lot of what we're going to be talking about today relates to how the federal share of program financing is determined and how states finance and fund their share of the program's expenses.
So briefly, the federal share is determined by the Federal Medical Assistance Percentage, also known as the Federal Matching Rate or FMAP. You're going to see FMAP references all throughout. This share is unique to each state and is calculated annually based on state economic conditions, specifically state per capita income relative to the national average. So basically, the higher a state's per capita income, the more responsibility it assumes for program costs and vice versa.
Importantly, under current federal law, the federal government must pay for at least half of those program costs. So put another way, states never pay for more than 50% of the program's costs under the current financing model. And that brings us to the way that states fund their share of the program's costs.
State legislatures hold the power of the purse, so this particular function is directly related to the state legislative role. The state share is predominantly funded through state general fund expenditures, which are generally raised through revenues through income taxes, property taxes, and sales tax. But states can also use mechanisms specific to the Medicaid program, including health care provider taxes, and other state and local fund transfers.
So now let's go into and dive into the potential state impact of the proposed reforms. So we're going to briefly discuss the proposed reform, why it matters, and the scope of state impact, starting with reductions in the federal match for the expansion population.
SLIDE 10 | KATHRYN COSTANZA, NCSL
Changes to Expansion FMAP
So to briefly level set, following passage of the Affordable Care Act Supreme Court case, the states were given the option to expand Medicaid coverage to non-disabled childless adults up to 138% of the federal poverty line. And in exchange for this coverage, the federal government is obligated to pay for 90% of the cost for this population.
So what does this particular reform do? Well, it reduces that enhanced 90% match rate down to the state's base match rate. So that's the rate that is calculated annually based on state economic conditions.
And why does this matter? Well, by law, no state has a base rate above 83%. So all the states that have expanded their Medicaid programs will experience a decrease in federal funding for this population. And the difference between that 90% enhanced match rate and the state's base rate will vary across states. Based on fiscal year 2025 federal match rates, expansion states could see anywhere from an 18% to 40% drop in federal funding for the costs of the expansion population. This will result in tough conversations at the state level on whether to assume these costs or to make program cuts to compensate for lost funds. The states that would be impacted include the 40 states and the District of Columbia that have expanded the Medicaid program.
Federal Matching Floor
The next proposal is to reduce the federal match floor. So as we said earlier, the federal government is required to pay for 50% of Medicaid program costs for the states. This reform would lower that floor for the 10 states that are currently at the match floor. And importantly, note that a separate proposal would also change DC's federal matching rate. And in combination with this, it could lower the district's federal funding significantly if combined.
Reduced Administrative Match
Next, we have the reduction in administrative match rate. Now, we're not going to dig into this in detail, but I did want to include it because it would impact all states. And while the federal matching rate for most administrative services is already set at 50%, states currently do receive enhanced federal matching funds for certain administrative activities.
So this proposed reform would set all administrative activities at that 50% floor, reducing some of those enhanced administrative matching rates. For example, the federal government pays 75% of administrative costs activities like quality review of Medicaid-managed care organizations, operation of the state Medicaid fraud control unit, and operation of the state Medicaid management information system. And some implementation activities, like implementation of a fraud control unit or information system, are reimbursed at an even higher percent, 90%.
While administrative costs account for less than 4% of state Medicaid program spending, some administrative costs, like information system upgrades, are large one-time outlays that can be difficult to cover on a case-by-case basis. For example, in 2018 and 2019, state Medicaid agencies identified information system procurement and system updates as a top budget and fiscal priority. This may also impact the implementation of the federal rules that are also under scrutiny.
Changes to Provider Taxes
And last but not least, we are going to discuss limits on provider taxes. So while we know that most state spending on the Medicaid program from the state general fund. As of 2018, we know that 17% of state share of Medicaid program financing comes from provider taxes. These are taxes that are levied against a class of providers and are used to increase the state share to draw down additional federal funds without increasing state general fund revenues. States often use these mechanisms to make investments in the Medicaid program or increase payments to certain providers through through supplemental payments paid through the state or directed payments made through managed care organizations.
States often can levy provider taxes against classes of private providers, such as hospitals, Medicaid managed care organizations, or emergency medical services providers. And currently, states can tax up to 6% of provider net revenue and use that money to draw down additional federal funds. So far, what we know about the limit on provider taxes is that it would reduce that 6% net provider revenue threshold down to 3% over time, although Congress really has a full spectrum of policy options available at its disposal when it comes to provider taxes. And it's also important to note that states often use provider taxes to make additional payments to providers and to shore up provider shortages.
SLIDE 11 | KATHRYN COSTANZA, NCSL
We also know that there could be potential downstream impacts should the budget proposals go in as proposed. And again, that's not a guarantee, but this is what could possibly happen. If the proposed budget proposals were to go into effect, we know that states would experience impacts on other state health priorities related to state strategies to address health workforce shortages, to address and improve care for people with disabilities, address behavioral health, especially youth mental health, and to continue priorities related to reentry and non-medical drivers of health. These are priorities that NCSL has identified in its legislative database tracking, as indicated in some of the linked documents we've provided here.
NCSL Resources
State Legislatures Address Medicaid Coverage and Payments in the 2024 State Legislative SessionNCSL Forecast '25 Special Report: Workforce Shortages Top List of State Health Priorities
Additionally, we would anticipate that cuts to the Medicaid program could also put downstream budget pressures on large state budget outlays, such as the State Employee Health Plan or education financing. And finally, changes to the provider taxes could also put pressure on local of state funding to the extent that those are not under scrutiny or not impacted. Cuts to provider taxes could result in downstream shifts to other sources that states use to finance their state share.
SLIDE 12 | KATHRYN COSTANZA, NCSL
And so with that, it's time to turn our attention to the true experts in this field. And with that, we're going to switch to our panelists. So we are so thrilled and lucky to be joined today by Robin Rudowitz, the vice president and director for the Program on Medicaid and the Uninsured at KFF, by Jennifer, the Medicaid Director from the Utah Department of Health and Human Services, and Greg Woods, the Medicaid Director of the New Jersey Division of Medical Assistance and Health Services. And with that, I will transfer it over to Robin Rudowitz to give us more of the national overview of what states could expect to see from specifically the expansion FMAP and provider tax changes.
sLIDES 13-14 | Robin Rudowitz, kff
Hi, thanks so much for having me and inviting me to participate in the webinar. So there is obviously certainly a lot of attention on the Medicaid program right now. Before I jump in, I just wanted to do one quick second on KFF, overview of KFF and myself. KFF is a nonprofit, nonpartisan, and health policy polling and news organization. We were formerly the Kaiser Family Foundation, but we have now changed our name to KFF because we are not affiliated with Kaiser Permanente. We have no family members on our board, and we are also actually not a foundation, and we don't make grants. We conduct our own research and analysis, and we post all of that research on our website for free, and we also do a lot of state-specific analysis, and I'll share some of that with you today.
I've also been at KFF for over 20 years, and I started my career in state government in New York State, working for the Ways and Means Committee. So that was a long time ago, but definitely roots in state government. So I am thrilled to be here.
SLIDE 15 | ROBIN RUDOWITZ, KFF
I think as you heard and got a such a great overview of what's happening right now. So Congress is in the middle of this tax and budget debate. And in an effort to offset costs of extending expiring tax cuts, the House has passed a budget resolution that includes this $880 billion in federal savings with a target for the Energy and Commerce Committee to hit. There are a number of proposals that you heard about, and I sort of highlighted in yellow some of the ones that we are going to be discussing in a bit more detail today.
So, before jumping into all the details and specifics on some of the proposals, I just wanted to back up again. I know we just got a little bit of level setting on the Medicaid program, but I always find that it's a little helpful to go back.
SLIDE 16 | ROBIN RUDOWITZ, KFF
Medicaid was enacted in 1965, so about to hit its 60-year birthday this July. Alongside with the Medicare program, there are quite different, although many people get them confused.
There were two foundational pieces, I think, when the Medicaid program was enacted. It provides guarantees to coverage for people who are eligible, but also guarantees to states for matching dollars with no cap. Additionally, Medicaid is a partnership between states and the federal government, so the federal government sets these broad federal rules, and then all states enact their programs, and they look quite differently across states, and I'm excited to hear from our states on the panel.
Medicaid is pretty complex. It provides and plays a lot of different roles in the healthcare system. I think we always tend to focus on the coverage piece, which is obviously important. So, covering one in five people and really disproportionate coverage for specific groups of people. So, children, eight in ten children in poverty, one in three people with disabilities, one in four people with mental illness. So, really, you know, a lot of coverage for specific groups.
It also provides support for 12.5 million Medicare enrollees. These are individuals who are often referred to as dual eligibles. So these people are, you know, participate in both the Medicare and the Medicaid program. And Medicaid really helps to make the Medicare program work for low-income people who are eligible for Medicare by paying premiums, as well providing wraparound services, importantly, long-term care services, because Medicaid, not Medicare, is really the primary payer for those services, paying for 60% of nursing facility and home care services in the country.
Medicaid is also an important revenue source for states, but also for providers, so safety net clinics and hospitals, and many states within the flexibilities that they have, run their program, have leveraged the Medicaid program to help address social drivers of health, maternal health, as Medicaid covers 41% of births in the country, and also to help increase access to mental health and substance use disorder services.
SLIDE 17 | ROBIN RUDOWITZ, KFF
So I also just wanted to provide a little bit of background in terms of when we think about reductions in federal financing, and we already heard about some of the implications for states, I think it's really important to understand where the Medicaid money goes. So I think this slide really provides a good overview of how many enrollees there are on the program. So 75% of enrollees are children and adults, but over half of the spending is really for people who qualify on the basis of disability or age. That's because those individuals typically have higher healthcare needs. And use long-term care services that are quite expensive. So they have much higher per enrollee costs.
SLIDE 18 | ROBIN RUDOWITZ, KFF
And again, in terms of thinking about dollars and what would happen with reductions in federal support for the program, understanding where the dollars go in terms of services is also important. So half of all Medicaid dollars go to managed care companies, so majority of states deliver services through managed care plans, and about three quarters of enrollees have their care delivered through managed care plans.
SLIDE 19 | ROBIN RUDOWITZ, KFF
So as we heard as part of the Affordable Care Act, there was an expansion in Medicaid coverage for nearly all low-income adults, up to 138% of the federal poverty level, again, as a result the Supreme Court ruling in 2012, that was effectively an option for states. And as of March 2025, all but 10 states have adopted the Medicaid expansion. Next slide. So for individuals covered under the expansion group, states receive this enhanced match. So 90% of the costs are covered by the federal government. Again, this is higher than the traditional match rate for states. One policy option, as you heard, under consideration in Congress has been to end that enhanced match and allow for the traditional match rate for this population.
SLIDE 20 | ROBIN RUDOWITZ, KFF
This slide highlights some analysis that KFF did to provide estimates of this proposal, and while the estimates I'm going to show here are national-level estimates, we were really looking at two wide-ranging scenarios. So what would happen on the left side if the federal government changed that enhanced match and would reimburse states at the traditional match rate? What would that mean for states if they wanted to maintain coverage for this group and maintain those programs?
And we estimated that this would shift costs to states at about $600 billion over the 10 years. But you would see that overall, enrollment in the program would remain flat and there would be no change in enrollment. Of course, we also know that states might respond to that change differently.
So in our second scenario, we assumed that all states would drop that expansion and this would result in state and federal reductions in spending and an estimated 20 million people could lose Medicaid coverage at the end of the 10-year period. I think these are really bookends of possible range of options. In reality, we know that states will make different choices and that will result in national estimates potentially between these two endpoints. On one end, we know it would be extremely challenging for states to make up the dollars. On the other hand, we also know it would be extremely challenging for states to reduce coverage for this population.
SLIDE 21 | ROBIN RUDOWITZ, KFF
If all states did drop the expansion, we know that the reduction in Medicaid enrollment would vary substantially across states. As was stated, there would be no change, you know, potentially no change for states that have not adopted the expansion. And again, we, in this report where these two slides are from, we do have tables with state-by-state estimates of spending and enrollment implications that's posted on our website. We also try to be really transparent with our methods, and this can allow states to look at the estimates and sort of figure out where your state might make some behavioral changes to be able to use those estimates and look at the ranges to tailor those to state-specific estimates.
SLIDE 22 | ROBIN RUDOWITZ, KFF
We also know, as you heard and know, since a lot of people have four and five level knowledge, that Medicaid is financed by states and the federal government based on this FMAP. This slide shows, and as was stated, that there are now 10 states that receive an FMAP at the FMAP floor, so at the 50% rate. So one proposal is to remove that floor. And, you know, there are some estimates, we have not put out state by state estimates. Obviously, this would affect the states that are at that floor. We know the Congressional Budget Office has included this proposal in one of their deficit reduction options, with an estimated savings of $530 billion over a 10 year period.
SLIDE 23 | ROBIN RUDOWITZ, KFF
Again, as was stated before, Medicaid, states pay for Medicaid with general funds, but also use these provider taxes to help make up the state share of program spending. There are a lot of rules around how states can use these provider taxes. For example, they need to be broad-based, uniform, they can't have a hold harmless provision, which means that states can't guarantee that providers get back the full of what they pay in the tax or that safe harbor.
So there's a hold harmless, but there's also this safe harbor that allows for a hold harmless provision that allows states to hold providers harmless up to 6% of net patient revenues. There is a policy that would look at reducing that safe harbor and what that would mean in terms of limiting states' ability to use provider taxes. So states currently use provider taxes most dominantly for hospitals and nursing facilities, but also a number of other providers.
We do an annual survey with states, and we know from that survey that 39 states had three or more provider taxes in place in 2024.
SLIDES 24-25 | ROBIN RUDOWITZ, KFF
We also ask about state, the revenue amounts of patient revenue that are estimated for these provider taxes. And we know 38 states had at least one provider tax that was over 5.5% of net patient revenue. So essentially policies that would reduce these ability to use provider taxes or lower that safe harbor would have pretty vast effects on a number of states. This is not just a few states that would be affected. So because we got such a good overview, I ran through slides fairly quickly, but I hope that provides a sort of range of some of the analyses that we have done. And I'm really happy and look forward to hearing from the panel and to answer any questions particularly about the analyses or other information that we might have available on our website.
So with that, I will turn it over.SLIDE 26-27 | JENNIFER STROHECKER, UTAH MEDICAID DIRECTOR
Okay, thank you, Robin, and thank you for the opportunity to present Utah's analysis on the budget reconciliation impacts around the federal match and provider tax reductions. My name is Jennifer, and I serve as the state Medicaid director for Utah. I've been in my role for three years, and prior to that, I've been at the state overall for seven years and joined as the Medicaid pharmacy director originally.
SLIDE 28 | JENNIFER STROHECKER, UTAH MEDICAID DIRECTOR
As we consider the impacts to our state program, I thought I thought I'd start with just giving a little background on Utah Medicaid specifics. So first of all, for all states and territories, Utah has the lowest Medicaid enrollment. About 11% of our population utilizes Medicaid as their health benefit. In Utah, we recognize that Medicaid really does play that crucial role in supporting the health of our state's most vulnerable residents. It reduces economic strain. And it contributes to better overall public health. Medicaid offers a comprehensive health benefit, physical health, behavioral health, dental services, as well as long-term services and supports for more than 342,000 Utahns every month.
In state fiscal year 24, our program costs were $5.3 billion. That accounts for $1.7 billion in state and local funds and $3.4 billion in federal funds. When you break that down from an annual cost to looking more at the daily and even hourly costs, that equates to $14 million per day and almost $600,000 per hour. All of the money that is spent on our Medicaid program goes to providers and services that support these populations.
Our employees, we have 348 individual individuals statewide that serve Medicaid and its programs as part of our state program.
SLIDE 29 | JENNIFER STROHECKER, UTAH MEDICAID DIRECTOR
Now, by serving as a critical healthcare safety net, we recognize Medicaid does contribute significantly to the overall well-being of the state and its resources. When we drill down a little bit more on the membership, we see that more than half of the 342,000 Utahns on Medicaid are children. A quarter of the membership includes working families or single adults who may not earn enough to afford private insurance or have health insurance available through their employer. Medicaid does allow them to stay healthy and maintain employment without the worry of overall overwhelming health care costs. The remaining quarter are made up of low-income parents, pregnant women, adults more than 65, adults with disabilities, and our CHIP program.
SLIDE 30 | JENNIFER STROHECKER, UTAH MEDICAID DIRECTOR
Before considering the impacts of the budgetary proposals, I wanted to share another reality we're facing in our state, and that is over the past many years, Utah's federal match is declining. So as you see here, we see that Utah's per person income continues to outpace other states. It is anticipated that our Utah's FMAP will continue continue to decline in future years. And you see here from 2019 to our current rate, we have seen that year over year decline. Currently, we have an FMAP of 64.4%. Next year, it declines further to 62.46%. So Utah's FMAP has been trending down over the last several years due to the state's per capita income improving.
So while Utah has been long known as the youngest states due to the number of children we have, we are actually experiencing a declining fertility rate, which is outpacing other states in this trend. And in fact, Utah has the seventh fastest declining fertility rate in the nation. So this declining rate, of course, leads to some financial pressures. Smaller families and fewer children does mean a higher per capita income, which results in a lower FMAP. 1% FMAP drop in our state costs approximately $20 million of state general fund. So this is a reality that we are navigating as the state is bearing more of the Medicaid program costs.
SLIDES 31-32 | JENNIFER STROHECKER, UTAH MEDICAID DIRECTOR
So it is in that context, as we analyze some of the budget proposal impacts, specifically on expansion. So to give a little bit of background, on December 23rd, 2019, CMS did approve Utah's full Medicaid expansion. And at that point in 2020, we did fully expand. This extended Medicaid eligibility to Utah adults whose annual income is up to 138% of the federal poverty limit. And of course, as has already been stated. The federal government covers 90 percent of the costs for these services with the state covering the remaining 10 percent.
So when we went to analyze what these budget proposals and what their impact would be, it was really important for us to first understand what are our adult expansion, what is the makeup of our expansion population today, and what is the utilization looking like. So here you can see that today we have about more than 83,000 adults enrolled in adult expansion and another much smaller program called Targeted Adult Medicaid. And you see this population is quite high risk and they're complex.
Of this, 83,000 adults, 22,000, more than 22,000, experienced homelessness in 2024. And more than half of parentless adults reported zero income. To look a little more closely at the types of diagnosis codes that were billed, and I'm just presenting our top two from cost, specifically where substance abuse was our most expensive diagnosis code that was treated for this population with almost 20,000 individuals with a diagnosis of substance abuse. Not only that, we also see 30,000 individuals with a mental health diagnosis and, of course, the associated costs tied to that.
Looking at pharmacy services as well, knowing that when you have diagnoses of substance abuse or mental health services, there's also high utilization of corresponding services to treat these diagnosis codes. What ranked highest were antidepressants, with more than 33,000 individuals receiving an antidepressant, more than 21,000 individuals receiving a mood stabilizer for a mental health condition as well. And then more than 20,000 individuals being treated with a substance use or MAT, medication assisted treatment for their substance use diagnosis.
So again, we're looking at the population that served through this benefit. And again, I'll just state that it's complex with high rates of substance use disorder and mental health diagnoses.
Looking at the providers, providers as well was very important to think about how not only are we just helping provide access to care and treatment for these individuals, but who gets treated, who gets paid for this and who is providing the care. So you see here with provider payments being broken down, nearly 1.4, more than 1.4 billion dollars is paid to the following provider types we have listed here. With professional services, these are our office visit, and nursing homes, pharmacy services, and dental, providing care to these individuals.
SLIDE 33 | JENNIFER STROHECKER, UTAH MEDICAID DIRECTOR
So along with when our adult expansion came into effect in 2020, predating that in 2020, the Utah legislature did pass a trigger law. So in Utah, we are one of nine states that does have a trigger law, inplace. And with that legislation, it stated that if federal financial participation for the Medicaid waiver expansion is reduced below 90%, the authority of the department to implement the Medicaid waiver expansion shall sunset no later than the next July 1st after the date on which the FFP is reduced.
And so certainly that is something we're evaluating is If this FMAP change were to go into effect, how would that affect the population that is being served, the providers that are delivering the care, and of course, the overall cost to the state? And so laying that out, there is also an additional provision within that law that does outline that Utah could continue to offer a limited primary care waiver that would serve about 13,000 individuals through a limited primary care waiver if that adult expansion benefit were to go away and were to sunset. So we could also continue our targeted adult population, which does serve just under 10,000 individuals as well. But as you can see, that would shrink the population that served today all the way down to about 25% of that expansion group.
So certainly we're modeling what our current state law says. But we're also evaluating other things as well as we model out what would it cost us to go from our current FMAP down to our existing state FMAP and also other scenarios as well.
SLIDE 34 | JENNIFER STROHECKER, UTAH MEDICAID DIRECTOR
Also an important consideration as we look at modeling are the policies that are uniquely connected to this adult expansion group. And I think it's just worth noting that there is a unique housing benefit that's targeted to our adult expansion and targeted adult Medicaid population, and we would see this as being dramatically reduced and or eliminated with this FMAP reduction. Additionally, we were one of the states that has been actively working on a reentry program. We received approval from CMS last June, last early July, to move forward with a justice reentry package. That also would be substantially reduced if this provision were to be implemented. We also have to consider the impact statewide to that of providers who are delivering services and consider the impact it would have on our local mental health authorities and how they would be affected by this change, and also the fact that hospitals would have increased uncompensated care.
SLIDES 35-37 | JENNIFER STROHECKER, UTAH MEDICAID DIRECTOR
OK, moving just look quickly at the impact on a provider tax reduction. Of course, like many other states, Utah uses state assessments or taxes to help boost provider payments for specific rates in their Medicaid programs. We have four specific provider taxes. We have hospitals, nursing facilities, and intermediate care facilities, and ambulances that do benefit from this provider tax. And you see listed on the slide here the current rate of which we're near that 6% threshold, but it's played out here with our hospitals, nursing facilities, and ICFs, as well as the ambulances.
If we were, we have modeled a variety of scenarios looking at a reduction from 6% to 5% to 2.5% or others. Our modeling allows a variety of approaches, even a complete elimination of that tax. What we have presented here would be a reduction from the current 6% down to 2.5% and the associated impact that it would have on our providers.
So what you see here, we would of course have that solid base payment that wouldn't be impacted, but the enhanced payment that runs through that provider tax, you can see that impact displayed here. So certainly if this was not replaced with general fund, this reduction would return our hospital payment levels closer to what they were prior to the passage of some legislation in 2023, which brought our hospitals up to average commercial rate for their directed payments.
For nursing facilities and ambulance providers, this would be a reduction to historic levels. And we see, of course, the associated financial costs of this reduction.
So I think that's my last slide, but just wanted to share what Utah has, and thank the opportunity for us to present a little bit of the analysis that we are doing here. Certainly, we're also continuing to analyze the other provisions that have been put forth, proposals that have been put forth, including directed payments and administrative match reductions as well.
SLIDE 38 | Kathryn Costanza, NCSL
And we'll go ahead and pass it over to Director Woods from New Jersey.
SLIDE 38 | Gregory Woods, New Jersey medicaid director
Thanks, Kathryn. And thanks, everyone, for having me today. Similar to Jen, I'm going to spend a moment just talking through how we're thinking about some of these proposals that Congress is considering here in New Jersey. And what I'm going to share with you today is a sort of abbreviated version of a deck that we have been sharing with members of our congressional delegation, their staff, and also members of our state legislature.
SLIDE 39 | Gregory Woods, New Jersey medicaid director
First, just to give a sort of quick orientation, I know that in the chat, we had lots of people who were rating themselves three, four, and five on Medicaid, so I think this is probably not surprising to you, but just at a high level in New Jersey, our Medicaid and CHIP program is known as NJ Family Care. It covers 1.8 million New Jerseyans. Services include a comprehensive benefit, including not just hospital, physician and prescription drugs, but also we are the primary payer for many kinds of long-term care, including nursing facilities, home and community-based services for the aged and disabled, behavioral health services, and community-based services for individuals with developmental disabilities. Our total Medicaid and CHIP spend in New Jersey is around $24 billion annually.
SLIDE 40 | Gregory Woods, New Jersey medicaid director
Now, when we have been talking to members of our congressional delegation, talking to members of our legislature, we focused on two broad areas. So the reductions in the federal matching funds for Medicaid, and then restrictions on existing health care funding streams, by which I mean provider taxes and directed payments.
SLIDE 41 | Gregory Woods, New Jersey medicaid director
What we have found to be helpful and may be helpful for you and your states is to just stop a moment and talk about how this funding is shared between the state and the federal government for our program. And I know this can be, you know, it can be a little bit hard to get your head around and a little weedsy. Here we have just tried to share some very high-level key messages, which are that the share of the cost of operating our program that is assumed by the federal government varies depending on which eligibility group we're talking about.
So as Jen and Robin were describing a few minutes ago, for our expansion adult population, which in New Jersey is on the order of six to 700,000 individuals. That's a 90% federal match. So the federal government assumes 90% of the share.
For our CHIP program, for our Children's Health Insurance program, it's about 65% in New Jersey. And then for all of our other Medicaid members, we're at a 50% match rate. So we are one of those states that was striped in one of Robin's maps. We are at that Medicaid floor. We're sort of at the minimum statutory level. And so that's the remainder of our Medicaid membership.
One thing that I have found useful just to frame this is when you blend all of those different eligibility groups together, and you sort of do, you do the math, you average it out. This works out to the federal government assuming about 60% of the total cost of our program and the other 40% coming from state and local sources. And so what that plays out in terms of dollars is of that $24 billion roughly in total annual spend, it's about 14 billion that's federal and about 10 billion that's state. And I think that's important context because I'm going to talk in a minute about some of these specific impacts that some of these changes would have. And I think it's just always important as a reference point to anchor when you think about that and what does it mean that we're talking about in the context of an overall $10 billion state budget.
SLIDE 42 | Gregory Woods, New Jersey medicaid director
Eliminate the 50% "floor" for Medicaid & CHIP
For Medicaid and CHIP we're in a world where $24 billion total spend, about 14 billion federal, 10 billion state. We have done some analyses of what the impact would be of a couple of different flavors of FMAP change. So the first one that we want to focus on is the removal of the floor.
And so just to say this again, I know Robin had mentioned this earlier, There is a range of federal matching rates for the sort of ordinary Medicaid population that where a state falls within that range is determined based on a formula that has to do with per capita income. That's the formula that I think Jen was alluding to when she just described how Utah's FMAP has been going down gradually. But no matter where the formula comes out, your federal matching rate can never be below 50%.
New Jersey is one of 10 states, and these were, again, I think those striped states on Robin's map, where we are at that 50%. And if that floor, that rule that says you can't go below 50% were to go away, our federal matching rate would go from 50% to around 38% for those sort of ordinary non-expansion Medicaid populations. Each state, each of those 10 states is going to have a somewhat different number of what their new FMAP would depending on their per capita income. I think if you are in one of those 10 states, it's probably a critical piece of information to know what would your FMAP look like under this proposal. I think some states it would be a larger impact than New Jersey, some it would be a smaller.
But so bottom line, it would take us from 50 to 38%. It would also have a second order effect on our chip matching rate. Our expansion adults in this scenario would still be at 90%, The bottom line here is instead of having an overall 60% federal matching rate, we would have around a 51%. And the impact in terms of lost federal funding for us would be about $2.2 billion a year. And again, as a reminder, that's in the context of a $10 billion budget. So it's an enormous cut. And I think anyone involved in a state legislature will appreciate how challenging that would be to manage.
Eliminate the 90% federal share for ACA Expansion Adults
We also modeled a scenario where the FMAP floor remains in place, but instead the 90% federal share for expansion adults, and again, they're in the range of 600,000 to 700,000 expansion adults in New Jersey, where that went from 90% to the normal rate, which for us would be 50%. Similar overall impact here, though obviously it is distributed differently. And it moves our sort of combined across all the populations federal match to around 51%. And it's a slightly bigger impact, it's 2.3 billion. I think the same basic logic here applies in terms of what that would mean in the context of a $10 billion budget.
Eliminate the 50% floor for Medicaid & CHIP and the 90% federal share for ACA Expansion Adults
And then the third scenario is if you combine scenario one and scenario two. So you both get rid of the 90% enhanced rate for expansion adults, and you also eliminate the floor. So both populations go down to that 38%. There we are looking at our overall rate would be 39%. It would be pulled up from that 38% just a little bit by CHIP. And our loss of federal funds would be $5.2 billion. So that would essentially, if we were to maintain services and eligibility, would mean a 50% increase in our state Medicaid budget, which is enormous. So we just have wanted to put in front of our congressional and in front of our legislature, just really concrete numbers about what these would mean, these changes would mean for New Jersey.
SLIDE 43 | Gregory Woods, New Jersey medicaid director
Wanted to just talk very briefly, and I know it's late on a Friday, and we're running towards the end, but about provider taxes and directed payments. Again, just very high level. Provider taxes are taxes on healthcare providers or managed care plans that are then reinvested to the health care system. As Robin described, there's currently a 6% cap and other restrictions on those taxes. And the congressional options include either lowering that cap, forbidding such taxes altogether.
And then we also, we think about directed payments in sort of the same space as provider taxes. Just quickly, a directed payment is a payment that the state requires a managed care plan to make to providers. Often above and beyond their ordinary reimbursement rates. In New Jersey, we use directed payments for several different provider types, particularly for hospitals. We use it to encourage high-quality care, so quality-based payments. We use it to encourage and support teaching hospitals that are involved in the training of new providers. We also use it to support safety net providers who serve high proportions of Medicaid members or uninsured members. And we know that there are under consideration here to restrict or forbid certain directed payments.
SLIDE 44 | Gregory Woods, New Jersey medicaid director
I'm not going to go through each of these rows, but I think just to give the overall picture, when you combine provider taxes and directed payments, that captures $4.2 billion of healthcare spending in New Jersey. And I should say that's the federal share. If these payments were eliminated, that's sort of the total universe of expenditures and supports for healthcare providers that could be lost. Each state is going to have a slightly different list here. I don't think New Jersey's list is particularly unique. One thing I would certainly recommend to anyone on this call is to familiarize yourself with what this list looks like in your state the specific provider impacts would be.
I will note, if you look at this list, there's several different hospital either assessments or incentive payments. The impact on hospitals in particular of eliminating these payments or restricting these payments could be very large. And obviously that has impact on us as a Medicaid program, impact on our Medicaid members, but it also has impacts on the healthcare system writ large. And this is the critical way that I think not just New Jersey, but many states use to finance their healthcare system and make sure that there's access for all state residents. And I think one of the maps that Robin showed earlier shows essentially every state has one or more of these arrangements and most states have several. So this is an issue that I know it's deep in the weeds. It can be sort of hard to find what is a provider tax, what is a directed payment, but this is something where there's a really significant impact in most states on many, many providers.
SLIDE 45 | Gregory Woods, New Jersey medicaid director
The last slide that I just wanted to quickly share, this is a screenshot of a document that is on our website, and the link is here, and please feel free to go and take a look. One thing that we thought was helpful and we have been using both with members of our state legislature and also members of our congressional delegations particularly on the hospital side, is to estimate what the impacts of some of these changes would be. And we've done that in several different ways. We've organized this by congressional district, by state legislative district.
And we are showing here, you'll see on the left side of the screenshot, there's a rough estimate of what the impact would be of the different FMAP changes, those three scenarios that I talked through before. On the right side, we're also estimating the impact of eliminating the county option, which is one of our provider taxes and directed payments that we particularly wanted to call out, both because it's the largest and also because it's a little bit easier, given the way that it's designed to assess a hospital-specific impact. I will just say we have found this very useful, and I think it makes it concrete for members of our legislature and congressional delegation just to see their local healthcare systems, their local hospitals, and what the impact would look like.
One caveat I'll give here is we're doing our best to estimate what the impact would be if the federal share of Medicaid matching dollars shrunk. Obviously, if we saw these very large reductions, there would be a very robust discussion about how we react. I don't know that it's perfectly realistic to assume that policy would remain constant. That said, I think this is a really good exercise to anchor what the impact would be. So for any individual hospital, depending on what policies we enacted in response to federal changes, the impact might be larger or it might be smaller. But this is sort of just assuming that it was distributed evenly and that the federal funding that was lost was sort of just was evenly distributed based on current hospital payment and reimbursement. I think it gives a very useful picture. And would certainly encourage everyone to go to the link here on the slide, and you can see sort of the full analysis that we've provided. So with that, I know it's four o'clock, or at least it's four o'clock here in New Jersey, so I will stop there and see if there are any questions.
Q&A NOT RECORDED