DEPARTMENT OF HEALTH AND HUMAN SERVICES Centers for Medicare & Medicaid Services



### Medicaid Program; Eligibility Changes under the Affordable Care Act of2010 (CMS-2349-P)

Preliminary Regulatory Impact Analysis

Centers for Medicare and Medicaid Services August 2011CMS-2349-P AMB/GMB/EB 8/9111 2 SUMMARY: This document announces the impact statement for the proposed rule entitled " Medicaid Program; Eligibility Changes under the Affordable Care Act of201 0," which is published in the 

### Federal Register.

IMPACT ANALYSIS I. 

### Executive Orders 13563 and 12866 We have examined the impact ofthis rule as required by Executive Order 12866 on Regulatory Planning and Review (September 30 , 1993) and Executive Order 13563 on Improving Regulation and Regulatory Review (February 2, 2011). Executive Orders 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and , if regulation is necessary , to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects , distributive impacts , and equity). A regulatory impact analysis (RIA) must be prepared for rules with economically significant effects ($1 00 million or more in any 1 year). The Office of Management and Budget has determined that this rulemaking is " economically significant" within the meaning of section 3(f)(l) of Executive Order 12866, because it is likely to have an annual effect of$100 million in any one year. Accordingly , we have prepared a Regulatory Impact Analysis that presents the costs and benefits of this rulemaking. The Department invites comments on this assessment and its conclusions. This proposed rule updates the regulations to include the new Medicaid coverage groups created by the Affordable Care Act, simplifies eligibility policy for Medicaid and the Children ' s Health Insurance Program (CHIP) , streamlines the eligibility and enrollment processes , and INFORMATION NOT RELEASABLE TO THE PUBLIC UNLESS AUTHORIZED BY LAW: This information has not been public ly di sclo sed and may be pri vileged and confidenti al. It is for intern al government use only and mu st not be di ssemin ated, di stributed, or copied to person s not authorized to receive the informati o n. Unauthori zed di sclo sure may result in pro secution to the full extent ofth e law .CMS-2349-P AMB/GMB/EB 8/9111 3 coordinates eligibility procedures with those that we have proposed for the Affordable Insurance Exchanges or "Exchanges". In addition, this proposed rule sets out the increased Federal Medical Assistance Percentage (FMAP) rates and the related conditions and requirements that will be available for State medical assistance expenditures relating to "newly eligible" individuals and certain medical assistance expenditures in "expansion States" beginning January 1, 2014. This analysis will serve as the base for estimating Medicaid impacts ofthese interrelated provisions. II. Need for Regulatory Action A central aim ofthe Affordable Care Act is to expand access to health insurance coverage through Exchanges, Medicaid, CHIP, and other sources ofprivate insurance. The number of uninsured Americans is rising due to lack of affordable insurance, barriers to insurance for people with pre-existing conditions, and high prices due to limited competition, small risk pools, and market failures. Millions ofpeople without health insurance use health care services for which they do not pay, shifting the uncompensated cost oftheir care to health care providers. Providers pass much ofthis cost to insurance companies, resulting in higher premiums that make insurance unaffordable to even more people. In many instances, State and local governments absorb a significant share ofthese costs. The Affordable Care Act includes a number ofpolicies to address these problems, including changes to Medicaid eligibility and enrollment. Starting in 2014, individuals and small businesses will be able to purchase health insurance through State-based competitive marketplaces called Exchanges. Exchanges will offer Americans competition, choice, and clout. Insurance companies will compete for business on a level playing field, driving down costs. Consumers will have a choice of health plans to fit their
INFORMATION NOT RELEASABLE TO THE PUBLIC UNLESS AUTHORIZED BY LAW: This information has not been publicly disclosed and may be privileged and confidential. It is for internal government use only and must not be disseminated , distributed , or copied to persons not authorized to receive the information. Unauthorized disclosure may result in prosecution to the full extent of the law.CMS-2349-P AMB/GMB/EB 8/9/11 4 needs. Exchanges will give individuals and small businesses the same purchasing clout as big businesses. The Departments of Health & Human Services, Labor, and the Treasury (the Departments) are working in close coordination to release guidance related to Exchanges in several phases. The first in this series was a Request for Comment relating to Exchanges, published in the August 3, 2010 

### Federal Register (75 FR 45584). Second, Initial Guidance to States on Exchanges was issued on November 18, 2010. Third, a proposed rule for the application, review, and reporting process for waivers for State innovation was published in the March 14, 2011 

### Federal Register (76 FR 13553). Fourth, two proposed regulations were published in the July 15, 2011 

### Federal Register to implement components ofthe Exchange and health insurance premium stabilization policies in the Affordable Care Act (76 FR 41866). Fifth,
a proposed regulation establishing the Consumer Operated and Oriented Plan (CO-OP) Program
was published in the July 20, 2011 

### Federal Register (76 FR 43237). The provisions that are included in this proposed rule implement certain requirements of sections 1413, 1414,2001,2002,2101, and 2201 ofthe Affordable Care Act. In combination with other provisions ofthe law, these proposals aim to accomplish the major goals of the lawexpanding coverage, improving care, and lowering costs. The first is to improve access to care by filling in coverage gaps for low-income populations. Medicaid and CHIP have long been central to meeting the health care needs of low-income children, pregnant women, seniors, and people with disabilities. However, Medicaid has historically been limited to certain "categories" of individuals, such as families with dependent children, aged, blind and disabled individuals, and for many ofthese groups, coverage has been available only to those with incomes significantly below the poverty line
. The median income threshold for parents' eligibility for

INFORMATION NOT RELEASABLE TO THE PUBLIC UNLESS AUTHORIZED BY LAW: This information has not been publicly disclosed and may be privileged and confidential. It is for internal government use only and must not be disseminated, distributed , or copied to persons not authorized to receive the information
. Unauthorized disclosure may result in prosecution to the full extent ofthe law
.CMS-2349-P AMB/GMB/EB 

### 8/9111 5 Medicaid is 64 percent ofthe Federal poverty level, 1 and before the Affordable Care Act, no category existed for non-elderly, non-disabled adults without children. This has led to a large fraction ofthe uninsured

- 40 percent in 2009- having income below the poverty threshold. 2 A second challenge addressed in the proposed rule is the complexity of and barriers to Medicaid and CHIP eligibility and enrollment. Research has demonstrated that confusion over Medicaid's current eligibility requirements has deterred some eligible people from enrolling in coverage. 3 Research has also indicated that eligibility requirements, such as asset tests, can serve
as a barrier to otherwise eligible people enrolling in Medicaid coverage. 4 There is also evidence that a major factor contributing to lapses in coverage is the difficulty low-income families have with negotiating through the administrative complexities involved in maintaining coverage at renewal. 5 Gaps in coverage in tum make it more difficult to assure quality of care, a usual place ofcare, and efficiency in the delivery of care. Studies have shown that individuals with health coverage gaps are more likely to experience harmful health consequences and higher rates of hospitalizations for illnesses that can be effectively managed through ongoing primary care, such
as asthma, diabetes, and cardiovascular disease. 6

1 M. Heberlein, et al. , "Holding Steady, Looking Ahead: Annual findings of a 50-State Survey of Eligibility Rules, Enrollment and Renewal Procedures, and Cost Sharing Practices in Medicaid and CHIP, 20 I0-20 II" Kaiser Commission on Medicaid and the Uninsured, 20 II. 2 Henry J. Kaiser Family Foundation, "The Uninsured: A Primer: Key facts about Americans without health insurance," 20 I 0. 3 J. Stuber, eta!., "Beyond Stigma : What Barriers Actually Affect the Decisions of Low-Income Families to Enroll in Medicaid?" Washington, D
.C.: The George Washington University Center for Health Services Research and Policy, 2000
. 4 V. Smith, et al, "Eliminating the Medicaid Asset Test for Families: A Review of State Experiences"
. Kaiser Commission on Medicaid and the Uninsured (200 I). 5 L. Ku and D
. Cohen Ross, Staying Covered: The Importance of Retaining Health Insurancefor Low-Income Families (New York: The Commonwealth Fund, Dec. 2002); Lipson K, Fishman E, Boozang P, et al. Rethinking Recertification: Keeping Eligible Individuals Enrolled in New York's Public Health Insurance Programs
.(New York: The Commonwealth Fund, August 2003). 6 L. Ku, et al. , "Improving Medicaid ' s Continuity of Coverage and Quality of Care." Association for Community Affiliated Plans (ACAP) (2009). INFORMATION NOT RELEASABLE TO THE PUBLIC UNLESS AUTHORIZED BY LAW: This information has not been publicly disclosed and may be privileged and confidential. It is for internal government use on l y and must not be disseminated , distributed , or copied to persons not authorized to receive the information. Unauthorized disclosure may result in prosecution to the full extent of the law
.CMS-2349-P AMB/GMB/EB 8/9/11 6 Finally, in addition to the effect on coverage and care, Medicaid ' s complexity can result in substantial administrative costs. A 2005 study of churning in California's Medicaid program, Medi-Cal, found that over a 3-year period, 600,000 children who were disenrolled , reapplied in a very short timeframe , 4 months for most. The cost ofreenrollment in Medi-Cal and then into their managed care plan was $120 million over the 3 years. 7 The Affordable Care Act and the proposed rule to implement it aim to simplify and streamline eligibility determinations and redeterminations, increasing coverage and reducing administrative costs. 

### III. Summary of Provisions Proposed in this Rule This proposed rule implements sections ofthe Affordable Care Act related to Medicaid and CHIP eligibility and enrollment, and FMAP rates and requirements. The proposed rule also provides for coordination ofMedicaid and CHIP eligibility procedures with the procedures that will apply to eligibility determinations for the premium tax credits and other insurance affordability programs. This proposed rule, together with the proposed rule establishing the eligibility parameters for advance payments ofpremium tax credits and cost sharing reductions and enrollment in a qualified health plan through the Exchanges , as well as the proposed rule developed by the Department ofthe Treasury regarding the health insurance premium assistance tax credit, would establish a framework for States to implement the changes to the Medicaid program that will take place in 2014 as a result of the Affordable Care Act. This proposed rule has four key elements: (1) Expanding Medicaid eligibility to individuals with family incomes at or below 133 percent ofthe Federal poverty level (FPL) and eliminating categorical exclusions for all States.

7G
. Fairbrother, " How Much Does Churning in Medi-Cal Cost? " California Endowment, April 2005
. INFORMATION NOT RELEASABLE TO THE PUBLIC UNLESS AUTHORIZED BY LAW: Thi s in fo rmati o n has not been publi cl y di sclo sed and may be privileged and confidential. It is for intern al government use on l y and mu st not be di sse minated, di stributed , or copied to person s not authorized to receive the information
. Unauthori zed di sc lo sure may re sult in prosecution to the full extent o f the law .CMS-2349-P AMB/GMB/EB 8/9111 7 Implementing the Affordable Care Act, this proposal contains a new eligibility group effective in all States participating in Medicaid, referred to as the " adult group. " Effective January 1, 2014 , this group will consist of individuals whose income is at or below 133 percent ofthe FPL , who are age 19 to 65 , not pregnant and not otherwise covered under Medicaid or Medicare. We note that eligibility for the adult group also includes a 5 percent income disregard
. (2) Simplified eligibility rules for most Medicaid and CHIP beneficiaries
. As required by the Affordable Care Act, this rulemaking proposes the use of a simplified income standard for determining Medicaid eligibility known as the applicable modified adjusted gross income (MAGI) standard for most populations the Medicaid program will serve (including children and adults under age 65). Financial eligibility under the applicable MAGI standard is based on a set of financial methodologies to determine income which will be applied consistently
across insurance affordability programs (for example, Medicaid, CHIP , and the premium tax credit)
. The proposed rule describes the process for applying the new simplified MAGI test. In addition , it proposes policies for ensuring that individuals who do not meet the simplified income test are evaluated for Medicaid eligibility on other bases (e.g., disability) and for potential eligibility for other insurance affordability programs (e.g. , premium tax credits in the Exchange). We are also proposing to amend existing regulations to establish a Federal regulatory framework that promotes a simplified approach to eligibility. This includes a proposal to consolidate multiple Medicaid eligibility groups into four broad categories

-- parents and other caretaker relatives , pregnant women , adults , and children. (3) Streamlined processes designed to create a seamless enrollment experience across Medicaid, CHIP and the Exchange.
INFORMATION NOT RELEASABLE TO THE PUBLIC UNLESS AUTHORIZED BY LAW: Thi s inform ation has not been publicly di sclosed and may be privileged and confidenti al. It is for intern al government use o nly and must not be d isseminated , di stributed, or copied to persons not authori zed to receive th e inf ormati o n . Unauthori zed di sclo sure may res ult in pro secution to the full extent ofthe law .CMS-2349-P AMB/GMB/EB 8/9/11 8 As required by the Affordable Care Act, the rule proposes to codify procedures for enabling individuals to apply, enroll, and renew enrollment in Medicaid and CHIP through an Internet web site using a single, streamlined application and to provide for enrollment in Medicaid and CHIP ofthose individuals who are determined eligible by the Exchange , without any further determination. The proposed rule allows States considerable flexibility to determine how they will set up their programs and integrate systems at the State level. This may be accomplished through complete integration of all insurance affordability programs into one administrative entity or through the use of shared services and agreements to promptly and efficiently adjudicate placement for most individuals. We are also proposing to make Medicaid enrollment renewal policies consistent with other insurance affordability programs by establishing a standard 12-month period of eligibility absent information indicating a change in circumstances, consistent with policies most States have already adopted for children and parents. States would redetermine Medicaid eligibility using reliable information contained in the case account, or other more current information available to the Medicaid agency. Additional documentation would be permitted as necessary and more frequent redeterminations of eligibility would occur whenever a State had information suggesting a relevant change in circumstances, either from the individual or family, data sources,
or other program information. (4) Codifies the new, higher FMAP rates that are effective in CY 2014 and proposes alternate methodologies to determine the correct FMAP for expenditures to promote administrative simplicity. The proposed rule codifies the new FMAP rates that will help States finance the coverage expansions through substantially increased Federal support. In addition, this proposed rule offers
INFORMATION NOT RELEASABLE TO THE PUBLIC UNLESS AUTHORIZED BY LAW: This information has not been publicly disclosed and may be privileged and confidential. It is for internal government use only and must not be disseminated , distributed , or copied to persons not authorized to receive the information
. Unauthorized disclosure may result in prosecution to the full extent ofthe law
.CMS-2349-P AMB/GMB/EB 8/9/11 9 alternate methods to determine the correct FMAP for expenditures due to the newly eligible individuals in Medicaid, beginning in CY 2014. This provision will provide States with flexibility and simplified methods for determining the appropriate expenditures for which the State would receive the increased portion of Federal matching funds under section 2001 ofthe Affordable Care Act. 

### IV. Estimates of the Impact of the Proposed Rule This preliminary impact analysis uses the estimates ofthe CMS Office ofthe Actuary (OACT) 8 and the estimates prepared by the Congressional Budget Office (CBO) and the staff of the Joint Committee on Taxation. 9 It provides both estimates to illustrate the uncertainty inherent in projections of future Medicaid financial operations. These modeling efforts generally account for all ofthe interactions among the Medicaid, CHIP , and Exchange pieces ofthe Affordable Care Act. A. Anticipated Effects on Eligible and Potentially Eligible Medicaid Enrollees In FY 2011, an estimated 55 million Americans will be enrolled in Medicaid. 10 Eligibility rules vary by State, but all States cover individuals who meet the Federal minimum eligibility standards. By extending Medicaid eligibility to adults with incomes at or below 133 percent ofthe poverty level, moving to a new, simplified income standard based on MAGI , streamlining and coordinating eligibility processes and policies with the processes for advance payment of premium tax credits and cost-sharing reductions for Exchange coverage, the

8 OACT's original estimates are documented in an April22 , 2010 memorandum "Estimated Financial Effects ofthe Patient Protection and Affordable Care Act, as Amended ," available at hnps ://www.cms . gov/ActuarialStudies/downloads/PPACA 20 I0-04

-22.pdf. These estimates have been updated to include later data from the Medical Expenditure Panel Survey (MEPS) and the Current Population Survey (CPS), together with updated participation assumptions and later information on policy decisions
. Additional information on the updated estimates is available from OACT. 9 CBO. Analysis ofthe Major Health Care Legislation Enacted in March 2010. Statement of Douglas W. Elmendorf. March 30 , 20 I I -- http ://www.cbo
.gov/ftpdocs/ J2 I xx/doc 12119/0?-30-IIealthCareLegislatiQ!!.J2.Q_f. 10 Op. cit. 8 INFORMATION NOT RELEASABLE TO THE PUBLIC UNLESS AUTHORIZED BY LAW: This information has not been publicly disclosed and may be privileged and confidential. It is for internal government use only and must not be disseminated, distributed , or copied to persons not authorized to receive the information. Unauthori zed disclo sure may result in prosecution to the full extent ofthe law.CMS-2349-P AMB/GMB/EB 8/9111 10 proposed rule would allow millions ofuninsured low-income persons who did not have access to
or could not afford health insurance to obtain coverage. The proposed provisions would also help ensure that eligible people remain enrolled in coverage, whether the appropriate coverage
source is Medicaid, CHIP or the Exchange, even when their circumstances change. OACT estimates that by 2016, an additional24 million people will be enrolled in Medicaid (see Table 1). While this coverage increase includes mostly newly eligible individuals, it also includes some currently eligible but not enrolled individuals seeking coverage. 

### TABLE 1: Estimated Effects of this Proposed Rule on Medicaid Enrollment, 2012-2016 (in millions) 2012 2013 2014 2015 2016 Enrollmene 1 0 0 15 21 24 Source: CMS Office ofthe Actuary
. OACT notes that such estimates are inherently uncertain, since they depend on future economic, demographic, and other factors that cannot be precisely determined in advance. Moreover, the actual behavior of individuals and the actual operation ofthe new enrollment processes and Exchanges could differ from OACT's assumptions. The sensitivity of estimated future Medicaid enrollment to different assumptions and projection factors can be illustrated by a comparison ofOACT's estimates with those prepared by the Congressional Budget Office. CBO has estimated a net increase of 16 million newly and previously eligible people enrolling in Medicaid and CHIP in 2016 as a result ofthe new law as implemented through this regulation (Table 2)
. 12

11 These estimates include approximately 2 to 3 million individuals with primary health insurance coverage through employer-sponsored plans who are enrolled in Medicaid for supplemental coverage. 12 CBO
. Analysis ofthe Major Health Care Legislation Enacted in March 20 I0. Statement of Douglas W
. Elmendorf. March 30, 20 II

-- http ://www.cbo.gov/tlpdoc s/ 121xx/doc 121 19/0 3

-3 0-H ea lth CareLegi s lation
.pdf. The INFORMATION NOT RELEASABLE TO THE PUBLIC UNLESS AUTHORIZED BY LAW: This information has not been publicly disclosed and may be privileged and confidential. It is for internal government use onl y and mu st not be disseminated, distributed , or copied to persons not authorized to receive the information. Unauthorized disclosure may result in prosecution to the full extent of the law
.CMS-2349-P AMB/GMB/EB 8/9111 11 

### TABLE 2: CBO Estimated Effects of this Proposed Rule on Medicaid & 

### CHIP Enrollment, 2012-2016 (in millions) 2012 2013 2014 2015 2016 Enrollment 0 0 9 12 16 Source: CongressiOnal Budget Office.
OACT prepared its estimates using data on individuals and families, together with their income levels and insured status, from the Current Population Survey and the Medical Expenditure Panel Survey. In addition, they made assumptions as to the actions of individuals in response to the new coverage options under the Affordable Care Act and the operations ofthe
new enrollment processes and the Exchanges. The estimated Medicaid coverage and financial effects are particularly sensitive to these latter assumptions. For example, while CBO used similar data and a similar methodology to OACT, their coverage and financial estimates are significantly lower than OACT's, in part as a result ofthe assumptions made in this area. 13 Specifically, a portion of the difference between OACT and CBO's projections can be explained by different participation rate assumptions. Among those eligible for Medicaid under the expanded eligibility criteria established by the Affordable Care Act, and who would not otherwise have health insurance, OACT assumed that 95 percent would enroll. This assumption, which is significantly higher than current enrollment percentages, reflects OACT's consideration of the experience with health insurance reform in Massachusetts and its expectation that the streamlined enrollment process and enrollment assistance available to people through the Exchanges will be very effective in helping eligible individuals and families become enrolled. Although CBO also anticipates that the streamlined enrollment process and Exchange enrollment CBO estimates exclude individuals with primary coverage through employer-sponsored plans who enroll in Medicaid for supplemental coverage. 13 CBO
. "CBO's Health Insurance Simulation Model: A Technical Description
." (2007, October)
. INFORMATION NOT RELEASABLE TO THE PUBLIC UNLESS AUTHORIZED BY LAW: This information has not been publicly disclosed and may be privileged and confidential. It is for internal government use only and must not be disseminated, distributed , or copied to persons not authorized to receive the information. Unauthorized disclosure may result in prosecution to the full extent ofthe law
.CMS-2349-P AMB/GMB/EB 8/9/11 12 assistance will improve applicants' ability to become enrolled, CBO has included a significantly smaller impact from this factor than assumed by OACT. 14 OACT and CBO both considered whether certain individuals, who have other insurance prior to the expansion ofMedicaid eligibility, would either discontinue their enrollment in their previous plan and enroll in Medicaid or would decide to keep their existing plan and enroll in Medicaid as supplemental coverage - although it is important to note that this is rare today. Other factors also affect the projected increase in Medicaid enrollment. For example, both organizations considered how employers' decisions to offer insurance in the future will affect workers and their decision to enroll in Medicaid. Medicaid enrollment could also be affected by policy decisions by the States and any changes to eligibility beyond the expansion ofeligibility to persons in households with income less than 133 percent of FPL. Overall, we do not expect that the conversion to MAGI rules will result in many currently eligible individuals losing coverage. However, there may be a relatively small number of currently eligible individuals that would no longer be eligible based on the MAGI methodology. For these individuals , there will be a cost of obtaining coverage through the Exchange, but this cost could be mitigated by premium tax credits and cost-sharing reductions. At the same time, the use ofthe MAGI definition of income will have the effect of increasing Medicaid eligibility for certain groups of individuals and families who would not have been previously eligible. For example , the number of individuals under age 65 who could qualify for Medicaid in 2014 as a

14 CBO ' s specific take-up as sumptions are not available. Researchers at the Urban Institute have approximated the participation rate assumed by CBO
. The Kaiser Family Foundation has characterized this assumption as follows:
" These results assume moderate levels ofparticipation similar to current experience among those made newly eligible for coverage and little additional participation among those currently eligible. This scenario assumes 57 percent participation among the newly eligible uninsured and lower participation across other coverage group s."_J
. Holahan and I. Headen , "Medicaid coverage and spending in health reform : National and State-by-State results for adults at or below 133 % FPL," Kai ser Commission on Medicaid and the Uninsured , May 20 I0 , available online at http: //www.kff
.org/healthrefo rm/upload/Medicaid

-Coverage-an d- Spending-in

-Health -Reform- National-and

-StateBy-S tate-Results

- for-Ad ults-at-or

-Below- 133

-FPL. pdf. INFORMATION NOT RELEASABLE TO THE PUBLIC UNLESS AUTHORIZED BY LAW: This inform ation has not been publicly di sclo sed and may be privileged and confidential. It is f or internal government use only and mu st not be di sseminated , di stributed, or copied to person s not authorized to rec eive the informati on . Unauthori zed di sclo sure may result in prosecution to the full extent of th e law .CMS-2349-P AMB/GMB/EB 8/9/11 13 result ofthe Social Security benefits that will be countable as part of MAGI will be significant. OACT estimates that as many as 1.9 million people under age 65 could qualify for Medicaid in 2014 as a result ofthe treatment of Social Security benefits under MAGI. For comparison, CBO
estimates that this definition will result in an additional 500,000 to I million people being enrolled in Medicaid, depending on the year. As stated in the preamble ofthe proposed regulation , the Administration is exploring options to address the concern that this change Medicaid eligibility rules increases State and Federal Medicaid costs. The net increase in enrollment in the Medicaid program and reduction in the number of uninsured individuals will produce several benefits. For new enrollees, eligibility for Medicaid will improve access to medical care. Evidence suggests that improved access to medical care will result in improved health outcomes and greater financial security for these individuals and families. Evidence on how Medicaid coverage affects medical care utilization , health , and financial security comes from a recent evaluation of an expansion of Oregon ' s Medicaid program. 15 In 2008, Oregon conducted a lottery to expanded access to uninsured adults with incomes below 100 percent ofthe FPL. Approximately 10,000 low-income adults were newl y enrolled in Medicaid as a result. The evaluation is particularly strong because it was able to compare outcomes for those who won the lottery with outcomes for those who did not win , and contains an estimate ofthe benefits ofMedicaid coverage. The evaluation concluded that for low-income uninsured adults , Medicaid coverage has the following benefits:
• Significantly higher utilization ofpreventive care (mammograms , cholesterol monitoring, etc.) ,

15 Amy Finkelstein , et al , "The Oregon Health Insurance Experiment: Evidence from the First Year," National Bureau of Economic Research Working Paper No
. 17190, July 20 II
. INFORMATION NOT RELEASABLE TO THE PUBLIC UNLESS AUTHORIZED BY LAW: Thi s in f ormation has not been publicly di sclosed and may be privileged and confidential. It is for internal government use only and mu st not be di sseminated , di stributed , or copied to persons not authori zed to rec eive th e informati o n. Unauthori zed di sclo sure may result in pro secution to the full extent of the law
.CMS-2349-P AMB/GMB/EB 8/9/11 14

• A significant increase in the probability ofhaving a regular office or clinic for primary care, and
• Significantly better self-reported health. While there are limitations on the ability to extrapolate from these results to the likely impacts of the Affordable Care Act's expansion of Medicaid coverage- in particular, the Oregon expansions targeted a population that is slightly lower income , on average, than those likely to gain Medicaid coverage in 2014- these results provide solid evidence of quantifiable health and financial benefits associated with coverage expansions for a population of non-elderly adults. The results ofthe Oregon study are consistent with prior research, which has found that health insurance coverage improves health outcomes. The Institute ofMedicine (2002) analyzed several population studies and found that people under the age 65 who were uninsured faced a 25 percent higher risk of mortality than those with private coverage. This pattern was found when comparing deaths of uninsured and insured patients from heart attack, cancer, traumatic injury, and HIV infection. 16 The Institute ofMedicine also concluded that having insurance leads to better clinical outcomes for diabetes, cardiovascular disease, end-stage renal disease, HIV infection and mental illness, and that uninsured adults were less likely to have regular checkups, recommended health screening services and a usual source of care to help manage their disease than a person with coverage. Other research has found that birth outcomes for women covered by Medicaid are not different than those achieved for privately insured patient, adjusting for risk variables. 17

16 Institute of Medicine, Care without coverage: too little, too late (National Academies Press, 2002)
. 1 7 E. A. Anum, et al , " Medicaid and Preterm Birth and Low Birth Weight: The Last Two Decades'' Journal of Women 's Health Vol. 19 (November 2010). INFORMATION NOT RELEASABLE TO THE PUBLIC UNLESS AUTHORIZED BY LAW: Thi s information has not been publicly disclosed and may be privileged and confidential. It is for intern al government use only and must not be dis seminated, distributed , or copied to persons not authorized to receive the information
. Unauthorized disclosure may result in prosecution to the full extent ofthe law.CMS-2349-P AMB/GMB/EB 8/9111 15
In addition to being able to seek treatment for illnesses when they arise , Medicaid beneficiaries will be able to more easily obtain preventive care, which will help maintain and improve their health. Research demonstrates that when uninsured individuals obtain coverage (including Medicaid) , the rate at which they obtain needed care increases substantially. 18 19 20 Having health insurance also provides significant financial security. Comprehensive health insurance coverage provides a safety net against the potentially high cost of medical care , and the presence of health insurance can mitigate financial risk. The Oregon study found people who gained coverage were less likely to have unpaid medical bills referred to a collection agency. Again, this study is consistent with prior research showing the high level of financial insecurity associated with lack of insurance coverage. Some recent research indicates that illness and medical bills contribute to a large and increasing share ofbankruptcies in the United States. 21 Another recent anal ysis found that more than 30 percent ofthe uninsured report having zero (or negative) financial assets and uninsured families at the 90th percentile ofthe asset distribution report having total fmancial assets below $13,000- an amount that can be quickly depleted with a single hospitalization. 22 Other research indicates that uninsured individuals who experience illness suffer on average a loss of 30 to 50 percent of assets relative to households with insured individuals
.23 Finally , the proposed revision to the process by which Medicaid beneficiaries renew their coverage should greatly reduce the likelihood that eligible individuals will lose coverage and be

18 S.K. Long, et al. , " How well does Medicaid work in improving access to care ?" HSR : Health Services Research 40 : I (February 2005)
. 19 Henry J
. Kaiser Family Foundation , " Children ' s Health

- Why Health Insurance Matters ." Washington , DC : KFF , 2002. 2

## °

C. Keane , et al., " The impact of Children ' s Health Insurance Program by age ," Pediatrics I04 :5 ( 1999). 2 1 D
.U. Himmel stein , et al. , " Medical bankruptcy in the United States , 2007 : Results of a National Study," The American Journal of Medicine 122 no . 8 , (2009). 22 ASPE
. The Value of Health Insurance : Few ofthe Unin sured Have Adequate Resources to Pay Potential Hospital Bill s. (2011 ). 23 Cook, K
. et al. , "Does major illness cause financial catastrophe ?, " H ealth Services Research 45 , no . 2 (2 0 I0). INFORMATION NOT RELEASABLE TO THE PUBLIC UNLESS AUTHORIZED BY LAW: This in fo rm ation has not been publicly disclo sed and may be privileged and confidenti al. It is for intern al governm ent use onl y and mu st not be di ssemin ated, di stributed, or copi ed to person s not authorized to rec eive the information
. Unauthori zed di scl osure may re sult in pro secution to the f ull extent of the law.CMS-2349-P AMB/GMB/EB 8/9/11 16 uninsured for some period oftime. Research has demonstrated the importance of continuous coverage in promoting access to care and in ensuring more efficient delivery of care. For example , children with unstable coverage are similar to children with no coverage at all in the benefits they receive from health care .24 Uninterrupted coverage is associated with

. . d 25 d . . "d bl h . 1"
. 25 26 27 Improvements m care an a percent re uctwn m avm a e osp1ta tzatwns . B. Anticipated Effects on States While State participation in Medicaid is voluntary , currently all 50 States and the District of Columbia operate Medicaid programs. The Federal government matches State spending for covered services based on a matching rate known as the FMAP. The Affordable Care Act provides for, and this proposed rule would implement, a significant increase in the FMAP for medical assistance expenditures for individuals who are considered to be " newly eligible ." The matching rates for previously eligible groups will be , for most States , set according to the regular Federal matching rate formula. However, States that had already covered low income adults before enactment ofthe Affordable Care Act up to a certain specified level , the socalled "expansion States , " will have their costs matched at rates established by a formula in the statute which are initially higher than their regular Federal match rate but lower than the rate for newly eligible populations. Beginning in 2019 , these rates will be the same as the rates for the newly eligible population.

24 G
. Fairbrother and J. Schuchter, "Stability and Churning in Medi

-Cal and Healthy Families ," The California Endowment, March 2008
. 25 L. Ku , " New Re search Shows SimplifYing Medicaid Can Reduce Children 's Hospitalization s," Center on Budget and Policy Priorities, June 2007
. 26 L. Simp son and G
. Fairbrother, " Health Policy Influences Quality of Care in Pediatric s," Pediatric Clinic s of North Ameri ca- August 2009 (Vol. 56 , Issue 4, Pages 1009-1021 , DOl : 10
. 1016/ j
.pcl.2009
.05.014)
. 27 G
. Fairbrother, G
. Madhavan, J
. Watring , A
. Goudie , K
. Jones , L. Ranbom , et. al. , " Policy Brief: Monitoring Enrollment and Retention of Children in Ohio Medicaid Programs "; Volume 2 , Issue 3 : The Child Policy Research Center at Cincinnati Children ' s Hospital Medical Center /University ofCincinnati ; 2010
. INFORMATION NOT RELEASABLE TO THE PUBLIC UNLESS AUTHORIZED BY LAW: This inform ati o n has not been publicly di sclo sed and may be pri vileged and confidenti al. It is for intern al government use on l y and mu st not be di ssemin ated, di stributed, or copied to persons not authori zed to rec eive the in fo rmati o n . Unauthori zed di sclo sure may result in pro secution to the full extent of th e law .CMS-2349-P AMB/GMB/EB 8/9111 17 OACT estimates that State expenditures on behalf ofthe additional individuals and families gaining Medicaid coverage as a result ofthe Affordable Care Act will total $2.7 billion in FY 2014 , $4
.0 billion in FY 2015, and $4.9 billion in FY 2016. The total increase in State coverage costs for FY 2012 through 2021 is estimated to be $80.3 billion. At the same time, the transitional FMAP for expansion States is estimated to transfer $35.5 billion from the Federal government to the States for 2012 through 2021. 28 Thus, the net impact on the States is estimated to be $44.8 billion in additional coverage-related costs from 2012 through 2021. As a result of the higher FMAPs applicable for the newly eligible enrollees and those in expansion States, OACT estimates that the Federal government will cover about 94 percent of total additional Medicaid expenditures in FYs 2012-2021, with States paying the balance of 6 percent. These estimates reflect the estimated net financial effects for States from all ofthe changes that would be implemented by this proposed regulation, including (i) the expanded eligibility criteria, (ii) conversion to the MAGI definition of income, (iii) costs for people who were previously eligible for Medicaid but who now become enrolled as a result of the streamlined enrollment process and application assistance through the Exchanges, and (iv) the FMAP adjustments for expansion States. We note that these estimates also take into account matters not addressed in this regulation, such as benefits changes. These estimates do not, however, consider offsetting savings that will result, to a varying degree depending on the State, from less uncompensated care, less need for State-financed health services and coverage programs, and greater efficiencies in the delivery ofcare. For comparison, CBO estimates that State spending on Medicaid and CHIP in the FY 2012-2021 period would increase by about $60 billion as a result ofthe Medicaid coverage

28 These estimates are dependent upon which States are ultimately determined to be expansion States under the Affordable Care Act. INFORMATION NOT RELEASABLE TO THE PUBLIC UNLESS AUTHORIZED BY LAW: This information has not been publicly disclosed and may be privileged and confidenti al. It is for internal government use only and mu st not be disseminated , distributed , or copied to persons not authorized to receive the information
. Unauthori zed disclosure may result in prosecution to the full extent of the law
.CMS-2349-P AMB/GMB/EB 

### 8/9111 18 provisions, including the savings for expansion States from transitional FMAP increases. 29 The Urban Institute and Kaiser Family Foundation studies looked at coverage, costs, and offsetting savings. One study estimated that from 2014 to 2019 the Federal government will bear between 92 and 95 percent ofthe overall costs ofthe new coverage provided as a result of the Affordable Care Act (including both the currently eligible but not enrolled individuals and the newly eligible individuals), with the States shouldering the remaining five to eight percent ofthe coverage costs. According to the analysis, relative to what would have been spent by States in the absence of the Affordable Care Act, State costs may increase by 1.4 to 2. 9 percent from 2014 to 2019. States are expected to benefit from the large influx of Federal dollars; and higher levels of coverage will allow States to reduce payments they make to support uncompensated care costs and other services that have historically been financed solely by the States. 30 A subsequent Urban Institute analysis estimates that the costs to States will be more than fully offset by other effects ofthe legislation, for net savings to States of $92 to $129 billion from 2014 to 2019. 31 The Urban Institute study is consistent with other analyses ofpotential offsetting savings and benefits to States. The transfer of Federal funding to State Medicaid programs for newly eligible individuals will substantially decrease the number of uninsured individuals across the States and will help provide a significantly stronger safety net, enabling low-income individuals to access affordable health coverage. As a result, the burden ofuncompensated care could be substantially reduced. It has been estimated that the cost of uncompensated care will fall

29 CBO. Analysis ofthe Major Health Care Legislation Enacted in March 20 I0. Statement of Douglas W. Elmendorf. March 30, 20 II

-- http ://www.cbo.gov/ftpdocs/ 121 xx/doc l2119/03-30-HealthCareLegislationJ2df. 30 J
. Holahan and I. Headen, "Medicaid coverage and spending in health reform: National and State-by-State results for adults at or below 133% FPL," Kaiser Commission on Medicaid and the Uninsured , May 20 I0, available online at: http :/ /www . ktT.org/healthreform/uploadiMedicaid-Coverage-and-Spending-in-Heal!h-Reform-National-andState-By-State-Results-for-Adults-at-or-Below-1 33-FPL.pdf. 31 M
. Buettgens et al., "Consider savings as well as costs: State governments would spend at least $90 billion less with the ACA than without it from 2014 to 20 19," The Urban Institute (July 20 I I). Available online at: http ://www.urban.org/uRioadedpdf /412361-consider-savings
.pdf. INFORMATION NOT RELEASABLE TO THE PUBLIC UNLESS AUTHORIZED BY LAW: This information has not been publicly disclosed and may be privileged and confidential. It is for internal government use only and must not be disseminated, distributed , or copied to persons not authorized to receive the information. Unauthorized disclosure may result in prosecution to the full extent of the law
.CMS-2349-P AMB/GMB/EB 8/9111 19 significantly by 2019 as a result ofthe policies contained in the Affordable Care Act, including the Medicaid expansion. 32 We expect that the proposed provisions would benefit States by reducing costs for uncompensated care. Evidence from Massachusetts suggests that the reduction in uncompensated care costs due to Affordable Care Act coverage expansions may generate substantial savings for States. Subsequent to the enactment ofhealth reform in Massachusetts in 2006, 33 the Massachusetts government realized annual savings of about $250 million from lower payments to hospitals for uncompensated care for the uninsured and underinsured. 34 Payments and utilization ofthe uncompensated care pool/health safety net trust fund have decreased and the rate ofnon-urgent emergency department visits declined by 2.6 percent among patients with premium assistance for coverage and uninsured patients in 2008 compared to 2006. 35 Note that Medicare and Medicaid Disproportionate Share Hospital (DSH) payments will be reduced under the Affordable Care Act by an estimated $19 billion from 2012-2016, according to OACT. Of the $19 billion reduction, the States' share would be about $1 billion. States could experience other financial benefits beyond the reduction of uncompensated
care. The Urban Institute estimates that State and local governments are expected to save approximately $70 to $80 billion during the 2014 through 2019 period through Federal funding of their spending on either State-funded health coverage or uncompensated care. The Urban

32 J. Holahan and S. Dom. "What Is the Impact ofthe Patient Protection and Affordable Care Act (PPACA) on the States? " The Urban Institute (June 20 I0)
. 3 3 Chapter 58 ofthe Acts of2006 ofthe Massachusetts General Court
. 34Massachusetts Division of Health Care Finance and Policy, "2009 Annual Report Health Safety Net." 35 Smulowitz, Peter B. et al. , "Emergency Department Utilization After the Implementation of Massachusetts Health Reform , " Annals of Em ergency Medicine In Press, Corrected Proof. INFORMATION NOT RELEASABLE TO THE PUBLIC UNLESS AUTHORIZED BY LAW: This information has not been publicly di sclosed and may be privileged and confidential. It is for intern al government use only and must not be di sseminated, distributed , or copied to persons not authorized to receive the information. Unauthorized disclosure may result in prosecution to the full extent ofthe law.CMS-2349-P AMB/GMB/EB 8/9/11 20 Institute expects these savings to more than compensate for additional costs to States resulting from the Medicaid coverage expansion. 36 Simplifying Medicaid eligibility policies will also reduce administrative burdens for States and for individuals. Medicaid's current patchwork of eligibility rules is complex for States to administer, requiring significant State resources and staff attention. The coordination of Medicaid eligibility policy and processes with those ofthe new Exchanges; the movement to a simplified income standard for most populations; the removal of asset tests; implementing an online, data-driven rather than paper-reliant application, verification and renewal process; employing a single, streamlined application for coverage across Medicaid, CHIP, the Exchange and other insurance affordability programs; and streamlining Medicaid eligibility categories should all result in a Medicaid eligibility system that is far easier for States to administer than Medicaid's current, more complex system. These changes could generate administrative savings and increase efficiency. For example, Florida's online application system reportedly saves the State nearly $83 million each year. 37 The new system through which States will verify certain information with other Federal agencies, such as income data from the IRS, will also relieve State Medicaid agencies of some current responsibilities, creating further efficiencies for the States. While administrative simplification is expected to lower State administrative costs, we expect that States may incur short term increases in administrative costs (depending on their current systems and practices) as they implement these changes. The extent ofthese initial costs will depend on current State policy and practices. As noted in the proposed rule, many States

36 John Holahan, and Stan Dorn
. "What Is the Impact ofthe Patient Protection and Affordable Care Act (PPACA) on the States? " The Urban Institute (June 20 I0). 3 7 UnitedHealth Center for Health Reform and Modernization, "Coverage for Consumers, Savings for States: Options for Modernizing Medicaid" (April 20 I0). INFORMATION NOT RELEASABLE TO THE PUBLIC UNLESS AUTHORIZED BY LAW: Thi s information has not been publicly disclosed and may be privileged and confidential. It is for internal government use onl y and must not be disseminated , distributed, or copied to persons not authorized to receive the information
. Unauthorized disclosure may result in prosecution to the full extent of the law
.CMS-2349-P AMB/GMB/EB 8/9111 21 have already adopted the administrative simplifications addressed in the rule. Moreover, Federal support is available to help States finance these system modifications. Notably, in previous rulemaking, CMS increased Federal funding to States to better support State efforts to develop significantly upgraded eligibility and enrollment systems. To anticipate and support these efforts , CMS published the Federal Funding for Medicaid Eligibility Determination and Enrollment Activities final rule (75 FR 21950) in the April 19 , 2011 

### Federal Register. That rule amended the definition of Mechanized Claims Processing and Information Retrieval Systems to include systems used for eligibility determination , enrollment, and eligibility reporting activities by Medicaid, and made this work eligible for enhanced funding with a Federal matching rate of 90 percent for development through 2015 and 75 percent for ongoing maintenance and operations costs. Systems must meet certain standards and conditions in order to qualify for the enhanced match. C. Anticipated Effects on Providers We expect that the expansion and simplification of Medicaid eligibility could also benefit providers , including those that serve low-income and vulnerable populations
. As more individuals obtain health insurance coverage , health centers, hospitals, clinics , physicians , and other providers are likely to experience a significant increase in their insured patient volume. We expect providers that serve a substantial share ofthe low-income population to realize the most substantial increase in insured patients. Providers , such as hospitals that serve a lowincome population, may financially benefit from having a higher insured patient population and providing less uncompensated care. In addition, we expect continuity of coverage to improve providers ' ability to maintain their relationship with patients and to reduce provider administrative burdens such as time spent helping patients to access information on coverage INFORMATION NOT RELEASABLE TO THE PUBLIC UNLESS AUTHORIZED BY LAW: Th is inf orm ation has no t been publicly di sclo sed and may be privileged and confidenti al. It is f or in tern al governm ent use only and mu st not be di ssemin ated, di stributed , or copied to person s not authorized to receive the inf ormati o n . Unauthori zed di sclo sure may result in pro secution to the full extent ofthe law .CMS-2349-P AMB/GMB/EB 

### 8/9111 22 options and to apply for Medicaid or CHIP. The improved financial security provided by health insurance also helps ensure that patients can pay their medical bills. The Oregon study found that coverage significantly reduces the level of unpaid medical bills sent to a collection agency. 38 Most of these bills are never paid,
so this reduction in unpaid bills means that one ofthe important benefits of expanded health insurance coverage, such as the coverage that will be provided through the Exchanges, is a reduction in the level of uncompensated care provided. Because the majority of individuals gaining coverage under this provision are likely to have been previously uninsured, we do not anticipate that the provisions ofthis proposed rule will impose new costs on providers. Medicaid generally reimburses providers at a lower rate than employer-sponsored health insurance or other forms ofprivate health insurance. For the minority of individuals who become eligible for Medicaid under this provision who are currently covered by employer-sponsored health insurance, there is thus a possibility that their providers may experience lower payment rates. Conversely, Medicaid reimburses community health centers at a higher rate than employer-sponsored insurance and many new Medicaid enrollees may seek treatment in this setting, which would increase payment to these providers. At the
same time, the increased Federal financial support for Medicaid, the growth in Medicaid enrollment, and the potential that many plans will operate in both the Exchange and in Medicaid may result in States electing to increase Medicaid payment rates to providers. 39

3 8 A. Finkelstein, et al., "The Oregon Health Insurance Experiment: Evidence rrom the First Year, " National Bureau of Economic Research Working Paper Series No
. 17190(20 II). 39 D. Bachrach, et al., "Medicaid's role in the Health Benefits Exchange : A road map for States," A Maximizing Enrollment Report, National Academy for State Health Policy and Robert Wood Johnson Foundation (March 20 II)
. Available online at http ://www .nashp
.orgisites/default/fi les/maxenroii %2 0Bachrach%200330 ll
.pdf. INFORMATION NOT RELEASABLE TO THE PUBLIC UNLESS AUTHORIZED BY LAW: This information has not been publicly di sclosed and may be privileged and confidential. It is for internal government use only and mu st not be dis seminated, distributed , or copied to persons not authorized to receive the information. Unauthorized disclosure may result in prosecution to the full extent of the law
.CMS-2349-P AMB/GMB/EB 8/9111 23 D. Anticipated Effects on Federal Budget The following Table 3 presents estimates ofthe effect ofthe Affordable Care Act on net Federal spending for Medicaid benefits. As a result of the Affordable Care Act, OACT estimates
an increase in net Federal spending on Medicaid benefits for the period FY 2014 and later, with the increase estimated to be about $45.4 billion in 2014 and about $202 billion over the 3-year period from FY 2014 through 2016. Reflecting the different participation assumptions and other projection factors described in section IV.A above, CBO estimates an increase in Federal spending of $162 billion over the same 3-year time period, as shown in Table 4. 40 

### TABLE 3: Estimated Net Federal Budgetary Effects of Increased Medicaid Benefit Spending, FY 2012-2016 (in billions of dollars)

2012 2013 2014 2015 2016 2012-2016 Net Effect on 0 0 45.4 70.4 86.3 202.1 Medicaid Benefit Spending due to Changes made by the Affordable Care Act Section 2001 Source: Office of the Actuary. 

### TABLE 4: CBO Estimated Net Federal Budgetary Effects of Increased Medicaid and CHIP Benefit Spending, FY 2012-2016 (in billions of dollars) 2012 2013 2014 2015 2016 2012- 2016 Net Effect on Medicaid 0 0 30 55 77 162 Benefit Spending due to Changes made by the Affordable Care Act Section 2001 Source : CongressiOnal Budget Office.


### V. Alternatives Considered

4

## °CBO
. Analysis of the Major Health Care Legislation Enacted in March 20 I0. Statement of Douglas W. Elmendorf. March 30, 20 II

-- http: //www .cbo .gov/ttpdoc s/ 121 xx/doc 12 1 19/03-30-Health CareLegislation.pdf. INFORMATION NOT RELEASABLE TO THE PUBLIC UNLESS AUTHORIZED BY LAW: This information has not been publicly disclosed and may be privileged and confidential. It is for internal government use only and must not be dis seminated, distributed , or copied to persons not authorized to receive the information
. Unauthorized disclosure may result in prosecution to the full extent of the law.

--- 

# ----------------------------------------------------- ---------------------CMS-2349-P AMB/GMB/EB 8/9111 24 The majority ofthe proposals, including the Medicaid coverage expansion and the move to the simplified MAGI income standard, made in this proposed rule codify the Affordable Care Act. In developing this rule, we considered alternatives to some ofthe simplified eligibility policies proposed here , as well as to the streamlined, coordinated process and eligibility policies this rule established between Medicaid, the Exchange , and other insurance affordability programs . One alternative would be to decrease State flexibility with regard to eligibility determinations. A more uniform, national system could lower administrative costs and facilitate national outreach. But it could stifle State innovation and prevent local circumstances from being accommodated. Another alternative would be to increase State flexibility relative to the flexibility already offered in the proposed rule. This could further ease States' adoption ofthe statutorily required changes to Medicaid and give States more control over enrollment. But it would increase complexity and administrative costs, lower coverage , and create possible coverage gaps . With regard to the increased FMAP rates available for State medical assistance expenditures relating to " newly eligible " individuals, we also considered requiring all States to complete a second, full eligibility determination using the State's December 2009 eligibility standards on all Medicaid eligibles to determine the appropriate FMAP rate based upon whether
or not each individual was newly eligible. We determined that such a requirement would be
overly burdensome to States and to beneficiaries and likely lead to errors and unnecessary costs. We did not believe such a mandate would result in an economic and efficient outcome in administering the program. In addition, such a requirement would directly contradict the

INFORMATION NOT RELEASABLE TO THE PUBLIC UNLESS AUTHORIZED BY LAW: This inf ormati o n has not been publicly di scl o sed and may be pri vileged and confidenti al. It is f or intern al government use onl y and mu st not be di sseminated, di stributed, or copi ed to person s not authori zed to receive th e inf ormati o n. Unauth ori zed disclo sure may result in prosecution to the full extent of th e law .CMS-2349-P AMB/GMB/EB 8/9111 25 principles ofthe Affordable Care Act to streamline and simplify eligibility and enrollment into health care programs. 

### VI. Limitations of the Analysis A number of challenges face estimators in projecting Medicaid benefits and costs under the Affordable Care Act and the proposed rule. Health care cost growth is difficult to project, especially for people who are currently not in the health care system- the population targeted for the Medicaid eligibility changes. Such individuals could have pent-up demand and thus have costs that may be initially higher than other Medicaid enrollees, while they might also have better health status than those who have found a way (for example, "spent down") to enroll in Medicaid. There is also considerable uncertainty about behavioral responses to the Medicaid changes. Individuals' participation rates are particularly uncertain. Medicaid participation rates for people already eligible tend to be relatively low (estimates range from 75 to 86 percent) , despite the fact that there are no premiums and low to no cost sharing for comprehensive services. It is not clear how the changes will affect those already eligible, or the interest in participating for those newly eligible, as previously described. These estimates are inherently difficult and depend on many factors , including State behavior, employer behavior, and the pace of development of new modernized systems. As reflected in participation rates for individuals, the States' actions on simplification and outreach affect whether or not individuals sign up and stay enrolled in Medicaid
. It may also affect the types of enrollees: a broad-based outreach campaign may attract individuals already eligible but not enrolled in Medicaid, whereas a campaign targeted at the newly eligible uninsured may yield different cost and coverage results.
INFORMATION NOT RELEASABLE TO THE PUBLIC UNLESS AUTHORIZED BY LAW: Th is information has not been publicly disclosed and may be privileged and confidential. It is for internal government use only and must not be disseminated, distributed , or copied to persons not authorized to receive the information. Unauthorized disclosure may result in prosecution to the full extent of the law
.CMS-2349-P AMB/GMB/EB 8/9/11 26
VII. Accounting Statement As required by OMB Circular A-4 (available at http: //www.whitehouse.gov/omb/circulars_a004_a-4/), in Table 5 we have prepared an accounting statement table showing the classification ofthe impacts associated with implementation ofthis proposed rule. Consistent with standard practice, we show all direct effects as transfer payments. TABLE 5: Accounting Statement: Classification of Estimated Net Costs, from FY 2012 to FY 2016 (in millions) Category TRANSFERS Annualized Year Dollar Units Discount Rate Period Covered Monetized 2012 7% 3% Transfers from Federal Primary FYs 2012-2016 Government to $35,564 $37,324 States on Behalf of Estimate41 Beneficiaries Annualized Monetized Primary Transfers from $2,131 $2,235 FYs 2012-2016 States on Behalf of Estimate Beneficiaries Annualized Monetized Transfers from Primary $1,577 $1,657 FYs 2012-2016 Federal Estimate Government to States Source: Office ofthe Actuary

41 The primary estimates are the annualized value ofthe net Federal budgetary effects reported in Table 3. INFORMATION NOT RELEASABLE TO THE PUBLIC UNLESS AUTHORIZED BY LAW: This information has not been publicly disclosed and may be privileged and confidential. It is for internal government use only and must not be disseminated , distributed, or copied to persons not authorized to receive the information
. Unauthorized di sc losure may result in prosecution to the full extent ofth e law.