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Michigan’s Proposed Medicaid Changes Threaten Progress

September 16, 2015 at 11:15 AM

Michigan’s proposed changes to its Medicaid expansion, which are all unnecessary, would raise out-of-pocket costs beyond what beneficiaries can likely afford, while making the program needlessly hard for the state to administer.  Michigan’s expansion has been extremely successful, with more than 600,000 residents gaining coverage and hundreds of millions of dollars in net budgetary savings.

Michigan expanded Medicaid last year through a demonstration project, or waiver, under which beneficiaries with incomes above the poverty line pay premiums equaling 2 percent of their household income and all beneficiaries pay copayments for some services.  Their combined out-of-pocket expenses, though, can’t exceed 5 percent of income, the maximum under federal law.

Michigan now proposes requiring non-poor people who’ve had 48 months of Medicaid expansion coverage to choose between remaining in Medicaid — with their premiums rising to 3.5 percent of income and the cap on out-of-pocket costs rising to 7 percent of income — or having the state buy a plan for them in the health reform marketplace.

The federal government allowed Michigan to impose premiums equaling 2 percent of income on the non-poor because they would pay that much for marketplace coverage if the state didn’t expand Medicaid.  But now Michigan wants to raise premiums well beyond what people would pay in the marketplace.  Even modest increases in out-of-pocket costs lead many low-income people to forgo needed care or drop coverage, an extensive body of research shows.

Michigan’s 2013 legislation expanding Medicaid requires the state to get approval for these changes by the end of 2015 or end coverage for all expansion beneficiaries.  But Michigan hasn’t shown that these changes are “likely to assist in promoting the objectives” of Medicaid, as federal waiver rules require, and raising the cap on out-of-pocket costs to 7 percent of income isn’t even allowable under the kind of waiver Michigan is seeking.  Yet the legislation holds coverage for all expansion beneficiaries hostage to these changes, which wouldn’t take effect until 2018 even if they received federal approval. 

In the 18 months since Michigan implemented the expansion, its uninsured rate has dropped by more than 30 percent and hundreds of thousands of people have received needed primary care.  Recent estimates say the expansion will produce net savings of nearly $1 billion over its first ten years.  Michigan shouldn’t let a poorly conceived provision of its 2013 law threaten these successes. 


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