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The Associated Press August 18, 2010, 3:12PM ET

Report: Nebraska Medicaid costs likely to soar

An actuarial firm hired by Nebraska says that federal health care reform will increase the state's Medicaid costs by a total of $526 million to $766 million over the next decade, figures Gov. Dave Heineman called staggering and shocking.

Heineman, a vocal critic of federal health care reforms and possible candidate for U.S. Senate in 2012, angrily blasted the projected costs released Wednesday as an unfair, unfunded federal mandate that could siphon dollars from education.

"It is potentially devastating to our state budget," the Republican governor said.

A state senator who is chairman of the health committee for a national association of state legislatures criticized the report for not adequately accounting for Medicaid savings that could be prompted by federal reforms.

State Sen. Jeremy Nordquist of Omaha, a Democrat, said that increasing the Medicaid rolls in the state, for example, will decrease the number of people forced to get expensive emergency-room services because they lacked Medicaid coverage.

Nordquist acknowledged the state will see "significant costs" from reforms, but that the federal government will cover most of the bill.

"While there's a cost to the state, there's no free lunch," Nordquist added. "We'll have to come up with 5 percent of the costs and we'll be insuring a significant number of Nebraskans. That's a win-win."

A national study, released in May by the Kaiser Commission on Medicaid and the Uninsured, has a much lower estimate of additional Medicaid costs than the firm hired by the state at a cost of $47,000.

The May report from Kaiser estimated that Nebraska's state-funded portion of Medicaid would increase by a total of between $106 million and $155 million from 2014 to 2019. That's similar to the 2016-2020 time window when the state-hired firm estimated Nebraska would be hit with most of the estimated, additional costs of between $526 million and $766 million.

Medicaid is funded with both state and federal dollars. The program's federally mandated expansion, allowing coverage of more adults starting in 2014, will be fully funded by the federal government for the first few years.

But Robert Damler of Indiana-based Milliman Inc., the firm that did the actuarial study, said that Nebraska will still face higher Medicaid costs during the first few years of the program's expansion because the state will have to pick up some of the costs of covering more children.

Beginning in 2016, the state will have to pick up 5 percent of the costs of adults, prompting the bulk of the projected costs to kick in.

The overall cost estimates of $526 million to $766 million assume that between 108,000 and 145,000 more Nebraskans will enroll in Medicaid. Currently, about 229,000 people are covered by Medicaid.

While most of the costs will be incurred in a few years, when Medicaid expansion begins, some additional costs will come this year and over the next two years. At the same time, lawmakers may have to close a budget gap that could be several hundred million dollars.

Damler said the loss of a pharmacy rebate could cost the state $5 million this year. During the following two years when administrative costs are also incurred, costs could grow by a total of $20 million over the period, he said.

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