Capitol Update Vol. 2 Issue 7
Yesterday the Joint Finance Committee (JFC) held
the first public hearing on the budget (AB40) at Greendale High
School. We listened to over 8 hours of testimony and did not
close the proceedings until we allowed everyone to speak.
The feedback we received from the public was greatly
appreciated and will be detailed in our next E-Update. This
E-Update focuses on the relationship between the state
Medicaid program (i.e. BadgerCare, Family Care, IRIS etc.) and
the Patient Protection and Affordable Care Act (aka ObamaCare). Our intent is to focus on the facts and steer
away from the politics related to the significant changes in
public policy relating to our health care system.
Health care Exchanges
Under the provisions of the Patient Protection and
Affordable Care Act (ACA), beginning January 1st,
2014, every Wisconsin resident, with very limited
exceptions, will be required to enroll in a health insurance
plan or face financial penalties. To facilitate the purchase
of affordable health care coverage, each citizen will have
access to an online health insurance “supermarket”, or
exchange, to compare plans and enroll in the plan of his or
Each state’s governor was given the option to establish and
fund a state-run exchange, partner with the federal
government in forming the exchange or allow the federal
government to administer the exchange. Because each option
is essentially regulated by the federal government and the
state-run option will eventually be dependent on state
funds, Governor Walker has elected opt out of the state-run
exchange, instead allowing Wisconsin residents to
participate in the federal exchange.
The health care exchange will serve as a marketplace for
Wisconsin residents to research, compare, and enroll in
qualified health plans (QHP). Each plan will be evaluated
according to prescribed standards to allow for easy
comparison of benefits, coverage and costs. QHPs will fall
into one of four categories based on the projected cost of
covered services. Plans projected to cover at least sixty
percent of healthcare costs incurred will be designated as
bronze; silver plans will cover at least seventy percent;
gold, at least eighty percent; and platinum, at least ninety
percent. As with any insurance, plans with lower coverage
will have lower premiums but will require individuals to pay
more out-of-pocket for use of health care services through
deductibles and co-pays.
In order to make insurance more affordable for low to
middle-income individuals and families, the federal
government will provide an income-based tax credit. This tax
credit will apply to individuals and families enrolled in
QHPs through the exchange and will be based on income level.
Wisconsin residents with incomes between 100% and 400% of
the Federal Poverty Level (FPL) will be eligible for the
credit. However, those with access to coverage through an
employer with premiums less than 9.5% of income and coverage
of 60% of projected costs will not be eligible for a tax
While most tax credits are paid when taxpayers file their
tax returns at the end of the year, the healthcare credit
will be payable in advance; it will be paid directly to the
health care provider when premium payments are due. The
amount of the credit will be based on income and the cost of
the second-lowest cost plan at the silver level in the state
exchange. Those who wish to purchase plans in the gold or
platinum range will be responsible for the extra cost. The
tax credit varies with income and is structured to ensure
that a person will not have to pay more than a specified
percentage of income for healthcare premiums.
|Up to 133% FPL
2% of Income
||3-4% of Income|
||4-6.3% of Income|
||6.3-8.05% of Income|
||8.05-9.5% of Income|
· For example: Sarah has an annual income of about $23,000, or
200% of the 2013 Federal Poverty Level.
Based on her income, she will not have to pay more than 6.3%
of her income to enroll in the second-lowest cost silver
· 6.3% of $23,000 = $1,449.
· The projected annual premium of the second-lowest cost
silver plan available to her is $5,800.
· Her tax credit is $4,351
(5,800-1,449), to be
applied toward whichever plan she enrolls in.
For individuals or families eligible for health insurance in
the exchange, enrolled in a silver plan, with income
under 250% FPL, the ACA makes additional cost-sharing
subsidies available to offset the cost of using healthcare
services. These subsidies are also based on income, and they
ensure that an even larger percentage of projected costs are
Governor Walker's Budget Highlight - Medicaid
Another upcoming change for Wisconsin residents relates to
Medicaid. With the passage of the Affordable Care Act (ACA) and a
recent ruling by the Supreme Court, each governor is left
with a decision to expand Medicaid with the federal
government’s money or to opt out and consider proposing a
change at the state level. While many states are taking
advantage of the “free money” and short-term benefits that
the federal government is offering, Governor Walker is
focused on the long-term implications of this decision. The
federal government has pledged 100% of the funds needed to
cover the expansion through 2017, but the burden for funding
will begin to shift to the state in the following years.
Rather than choosing to participate in the federal
government’s expansion, Walker has proposed a similar,
state-supported change to BadgerCare, the state’s Medicaid
Many opponents of Walker’s plan argue that by not
participating and essentially leaving this money on the
table, we are simply giving it away to other states that do
elect to participate in the expansion. However, with the
federal government so deeply in debt, this money is
essentially being printed as needed; by refusing the federal
funding, we are, in effect, cutting federal spending.
One long-term implication of this decision is decreased
reliance on the federal government for funding. While the
government promises to fund the program 100% for the first
three years and gradually reduce that to 90% in the
following years, participation in this program requires
placing a substantial amount of faith in Washington. If
Congress decides that the funds are no longer available,
Wisconsin taxpayers will be forced to foot the bill. Given
the current state of federal finances, is it wise to rely on
the federal government to continue funding this program?
Another positive impact of this program is decreased
dependence on government. While the President’s plan
encourages increased dependence through Medicaid expansion,
Governor Walker’s proposal provides the opportunity for more
Wisconsin residents to become independent as they are moved
from the Medicaid program into the private exchange with the
help of tax credits and subsidies.
Governor Walker is not alone in his stand against the
expansion of Medicaid. Fourteen other governors have
expressed their intention to oppose the expansion, with
three others undecided but leaning towards not participating
in the expansion.
So how exactly will Governor Walker’s plan work? Currently,
BadgerCare covers pregnant women and children up to 300% of
the FPL, parents with incomes up to 200% of the FPL and a
small percentage of childless adults. Those outside of these
limits are uninsured or purchase private insurance.
Compliance with the ACA expansion option would require
expanding BadgerCare with federal funds to cover nonelderly
adults with incomes up to 133% of the federal poverty level
(FPL). Those with higher incomes (up to 400% of the FPL) not
covered under BadgerCare will be eligible for tax credits,
or subsidies, from the federal government to reduce their
insurance costs and help them find affordable insurance in
the newly established health insurance exchange.
Governor Walker’s plan expands BadgerCare without federal
funds to cover all adults up to 100% of the FPL. Those
with incomes between 100% and 200% of the FPL will no longer
be eligible for BadgerCare, but will be able to take
advantage of a federal subsidy in the healthcare exchange.
Just as under the ACA expansion, every adult under 400%
of the FPL will be eligible for either BadgerCare or a tax
credit. In fact, this plan is projected to allow roughly
225,000 Wisconsin residents who are currently uninsured to
obtain affordable healthcare.
The Governor’s plan is based on common sense and fiscal
responsibility. Rather than enabling individuals to depend
on government for support, “The Governor believes that
government can best support those in need by helping them
become independent, which leads to more freedom and more
prosperity for everyone” (2013 Budget in Brief)
· Every Wisconsin resident with income up to 400% of the
Federal Poverty Level will be eligible for either Medicaid
or a federal tax credit to help offset the cost of health
insurance, unless an “affordable” employer- sponsored plan is
· An affordable employer-sponsored plan is a plan that has
premiums less than 9.5% of income and that covers at least
60% of the projected cost for covered benefits.
There will be no change for children and pregnant women
under the proposed Medicaid plan.
· Adults up to 100% of the FPL will be covered under the new
· Adults between 100-400% of the FPL will be eligible for an
income-based tax credit to offset the cost of insurance
· Adults below 250% of the FPL who are enrolled in a silver
plan will be eligible for additional federal assistance to cover out-of-pocket costs incurred at the point of service.
I understand this is a complicated and
important issue. We are scheduling public hearings in the
near future to further explain the changes and offer a forum
for questions regarding the changes.
Enjoy the change of weather and have a great weekend!