Susan Pendergrass (00:00)
Okay, here we go. You ready? Elias Tsapelas we are going to talk about IT, the big IT, the One Big Beautiful Bill Act Law I don't feel like I understand it. I suspect there's a lot of people reading the news that don't understand it, but you seem to understand a lot of it. So thanks for coming to talk to us about it today.

Elias Tsapelas (00:19)
No, no problem. think there's a lot of misconceptions, especially on what's happening with the welfare programs in the bill. So I'm sort of happy to kind of dive into those.

Susan Pendergrass (00:27)
Yes. Yeah,

I've definitely seen that this is going to basically strip health care from millions and millions of people and kids will be hungry. And I don't want to minimize that. But I also feel like, you know, we had Brian Blaze on the podcast and I thought that I had an understanding of it that wasn't exactly lined up with that. But let's just start there. Let's just start with what folks are saying about Medicaid that, you know, tens of millions of people are going to be

are going to lose health insurance under the One Big Beautiful Bill Act. Explain that to me.

Elias Tsapelas (01:01)
Well, I guess the first thing that people sort of need to understand about just how Medicaid works is that it's really gotten just tremendously more expensive just in recent years. The Biden administration did a lot, especially during COVID times to really change how the program works, but also just to change the trajectory going forward. So even after everything in the, you know, the one big beautiful bill goes into effect, we're still looking at basically putting the program's costs

back on the trajectory that it was in in 2021. this is not like taking us back to the stone ages here. This is really just moving us back about five years. where sort of the root of all these pieces in here come from, because there is discussion of this is eliminating waste, fraud and abuse. And mean, there certainly is a lot of that. But what I think a lot of people don't understand is that what most states are doing on Medicaid right now is that they

paying health plans to cover people that are on the program. That's what Missouri does. We contract with, now this isn't for everyone on the program, but especially for the Medicaid expansion population. So that's healthy adults. Sure. Yeah.

Susan Pendergrass (02:11)
So what's the Medicaid, okay, so let's just pretend we don't know much at all. So Medicaid

is a program that's designed to cover health insurance costs for poor people and disabled people.

Elias Tsapelas (02:24)
Yes, so there's a lot of kids. So about 50 % of kids in Missouri are on Medicaid. The state covers about 66%, about two thirds of all nursing home costs. The state's paying for about a third or a little bit more of all births than the state. But since 2020, yeah.

Susan Pendergrass (02:34)
Okay.

So low income pregnant women

can get Medicaid coverage and their children can get Medicaid coverage. So then who is in the, what you call the expansion population?

Elias Tsapelas (02:47)
Yes.

Yes, and so just real quick, I would say there are a lot of disabled people on the program too. Medicaid does provide coverage to people that health insurance would never provide for very disabled people. Yes, but most of this now is not really going to be talking about them. It's talking about Medicaid expansion, which are healthy adults that make up to 138 % of the federal poverty limit. And so that is not...

Susan Pendergrass (03:00)
permanently disabled and cannot work.

Elias Tsapelas (03:16)
You know, it's not a ton of money, but these are people that generally, you know, can work. And prior to 2021, you know, someone like me who doesn't have kids or is not married, you know, I couldn't even get Medicaid in Missouri if I lost my job or something. I wasn't, I wouldn't be eligible under any circumstance with, with expansion. That is something that's on the table. And so that's what the federal government is.

you know, starting to look at here. And there were just a ton of kind of bad incentives that essentially developed with Medicaid expansion. And what this bill tries to do is say, OK, if we take into account that states are now paying different health plans, essentially monthly for people that are on this coverage, we need to have a better idea of whether the people we're paying for are actually eligible to be receiving this

coverage because essentially what's happened in recent years, especially during the Biden administration, this got expanded, was essentially banning states from checking whether people were still eligible. And so in a perfect world, you know, the government would, if you lose your job, get on the program, the government would just know if you got your job, you didn't need coverage anymore, or you got other coverage, you didn't need it anymore. You would just get removed from the program. Well, that doesn't really happen.

as much as you would think. The IT systems can't really deal with it. And so what has happened is you have just a ton of people that are on the program that the state is paying, you five to $700, $800 per month for health coverage, but they don't win.

Susan Pendergrass (04:53)
Let me just stop you real fast. What you're saying

is not because they're sick or hurt, not because they go to the doctor, but because they pay for a healthcare plan, like they pay an insurance premium for these people. I do know anecdotally of some young unmarried non-parents who went to say the emergency room and found out they didn't even know it that they were on Medicaid. So they didn't even know they were on Medicaid and apparently they were on Medicaid. So what you're saying is for those folks,

The state's just paying premiums towards a Medicaid plan for them. And they may actually have their job, they may have a job now. They may no longer even qualify, but the state's not going back and checking everybody on the Medicaid rules to see if they still should be on the rules.

Elias Tsapelas (05:40)
Right, and there could be tremendous costs there. mean, in a perfect world, people would tell the government if they got a job. A lot of people think that the government will just know, you know, I mean, I'm paying income taxes, you know, that should set off an alarm in the system or something. But that's just really not happening. And so this is really something with the way that states have changed paying for Medicaid because

Susan Pendergrass (05:53)
Thank you.

Elias Tsapelas (06:04)
Previously, was basically the state would just pay medical bills for people that are on the program. you know, so if you don't receive any sort of health care, you you don't go to the doctor, you don't do whatever, there's no real cost to that. And so, you know, it's not necessarily as big of a deal. But as soon as you're paying for health, paying for these health plans, and there's a cost, whether anything is taken up or not, you know, there's just enormous costs. So there's, you you add this to all just the tremendous cost growth in just health care generally.

Susan Pendergrass (06:08)
Okay.

Elias Tsapelas (06:33)
into the way states have handled Medicaid and how their state IT programs, I think we'll probably go into this a little bit more later, but.

Susan Pendergrass (06:40)
No, mean,

let's go ahead. So what's in the One Big Beautiful bill? You have to recertify people?

Elias Tsapelas (06:45)
Yeah, so a couple of the big things in there are essentially you have to start checking at least twice per year whether people on the program are still eligible. And that's not even that crazy, but there is like a tremendous, there's a very big enrollment loss that is shown on the CBO, the Congressional Budget Office report for this.

of if you just check more frequently. And there are people that have concerns about the red tape that that would involve. And then there's also.

Susan Pendergrass (07:13)
I mean, can Missouri

do it? Can Missouri check all Medicaid recipients twice a year? we have the systems in place for that?

Elias Tsapelas (07:20)
I would like to think so. I'm not 100 % sure. I'm not 100 % sure. I'm not 100 % sure whenever. So during COVID, basically the federal government banned states from checking people's eligibility ever after they were on the program. And so that was about three years. And when Missouri tried catching up, they basically had to do it over a whole year. So it took them a very long time to catch.

Susan Pendergrass (07:22)
Good. I would like you to think so. ⁓

Elias Tsapelas (07:50)
back up and so just to provide like a little baseline, there's about 300, 350,000 people on Missouri's Medicaid expansion right now. So 1.2 million people in total on the program, 350,000 on expansion. And so this would be more eligibility checks, more push on the state IT, and then probably the most technically difficult part besides eligibility checks will be that this bill

we'll start requiring what are called community engagement requirements or work requirements for this healthy, able-bodied expansion group.

Susan Pendergrass (08:24)
So who is that, the people under the age of 65 who don't have any diagnosed disability? Like how do they know who's supposed to work?

Elias Tsapelas (08:32)
Yeah, there

are a lot of carve outs there. if you have, essentially if you have kids, I think under the age of 14, you're not going to qualify. new moms, just people with young kids up until you essentially would age out of the expansion group. So if you're above 65, you're not even in the expansion group anyways, you're in a separate Medicaid group. So really it's focusing on the people that

could be in the workforce trying to get there. And there are a lot of different ways to meet the community engagement requirements besides just getting a job. If the job market's bad and it's difficult, there are ways for volunteering, volunteer and stuff like that. And I would add on this too is that the SNAP program, so the Supplemental Nutrition Assistance Program, otherwise known as food stamps,

Susan Pendergrass (09:14)
You can volunteer, right? Yeah.

Elias Tsapelas (09:27)
has had work requirements since the 90s. So this is not a new to these program ideas. This is a, it's just bringing something that essentially has been in another program into Medicaid for people that could be working. And, you know, we'll see what that has to do on, you know, the enrollment, but it is important to point out that if you do, because being in the Medicaid expansion group is reliant on your income,

So you have to have income below a certain amount to be on it. If you get a job, most people aren't going to qualify for that anymore. And so it's not as, it's not as whenever people talk about, you know, the, coverage losses, some of that coverage loss is literally, you know, this made people go apply for a job and they got a job and now they don't need Medicaid anymore. So it's not all, you know, people getting stuck in red tape and losing coverage and

you know, not having, you know, something to do. That is important to point out, I think.

Susan Pendergrass (10:25)
And just

then why are people saying that people are going to get kicked off? because they're going to go through and recertify. They're not going to be eligible.

Elias Tsapelas (10:33)
So there is a certification piece. There's also the piece of, you are subject to work requirements and you don't go do those things that are required. there's a little bit of how many people, the big question I think a lot of people have is how much, how many people are gonna be getting stuck in this red tape? That you're gonna be adding some new obstacles and how.

Susan Pendergrass (10:40)
work then you won't

Elias Tsapelas (10:56)
how well our state's gonna handle it and how easy is it gonna be for people to meet these requirements? And right now it's a little bit difficult to say how that's going to go, I don't think it's something that the government shouldn't pursue because we're worried that states haven't invested enough in their IT systems. mean, most of these things in the bill do have delayed implementation times.

You know, they basically give states time to try to figure it out. And that's not to say there won't be issues, but.

Susan Pendergrass (11:23)
Give states time until

maybe after the midterms.

Elias Tsapelas (11:28)
Well, you know, we'll see how many of these things are actually in effect 10 years from now.

Susan Pendergrass (11:34)
So let's move on then to SNAP benefits, because I've also heard that this is going to take food away from people. What are the changes in the One Big Beautiful bill to the SNAP program?

Elias Tsapelas (11:46)
Well, the changes to SNAP actually could impact Missouri's budget possibly more than Medicaid, or at least I would think in the short term, because what's happening with the SNAP program is that the federal government is finally putting in place some incentives essentially for states to basically do a better job giving out these benefits. So how the SNAP program works is that the federal government pays 100 % of the

pays 100 % of the benefit right now. And so states are only in charge of the administration of that. And so what has happened over the years is that states have just very, well, they just are very, they have very high error rates in how they're determining who is eligible for the program. And so right now, or at least as of last year, for example, Missouri's error rate is about 10 % for food stamps. And of those error rates, so, you know,

Susan Pendergrass (12:24)
gotten more generous.

Elias Tsapelas (12:43)
If you look at error for something like this, it's you know, error on the side of overpayment or error on the side of underpayment. And the error rate for overpayment is about 10 times higher than underpayment. And you can look at that basically everywhere in the country. And, know, that's where things are. And so there's a little carve out on this bill. It's sort of funny for Alaska because they get a little delay, I think, because of Senator Lisa Murkowski. But Alaska's error rate is almost 25 percent.

Susan Pendergrass (13:10)
Holy cow.

Elias Tsapelas (13:11)
And so, you know, in 2025, it's kind of crazy to think that states would be messing up this much if there weren't incentives, you know, sort of pushing them that way. And so. Right. So what is essentially happening now is it's basically telling states if you don't get your air rate below six percent within the next two years, you're going to have to start paying some of the snap benefits. It starts at, I think, 15 percent.

Susan Pendergrass (13:19)
So what are the incentives?

Elias Tsapelas (13:38)
then depending on how high your error rate is, it goes up in percentage from there. So it's essentially trying to get every state below 6%, which, you know, if Missouri's is a little less than 10, you know, we'll see how quickly they can, you know, get these numbers dropped. But I don't think that's an unreasonable target. I mean, there's a lot of money on the line there. So, you know, I think it'll be interesting to see how some of these programs, you know, for the first time, start responding to incentives.

Susan Pendergrass (14:06)
Okay, so what about, how does the One Big Beautiful bill impact Missourians in terms of taxes?

Elias Tsapelas (14:14)
Well, a lot of people I think are going to get a benefit, at least at first. The standard deduction is going up, especially for seniors. For single filers, your standard deduction is going up by $750. If you're a senior, I think it's based a little bit on income, but your standard deduction should go up by about $6,000, which is a lot. There will be a new tax break for car loan interest.

Susan Pendergrass (14:44)
if the car is made in United States, 100 percent, right?

Elias Tsapelas (14:44)
There what?

I'm not exactly sure if it has to be assembled in the US or what the part piece of that is, but it's still a pretty large deduction that I believe is, I think is going to have significant costs and could impact a lot of people. And then there's the pieces of no tax on tips or overtime, which is temporary in the federal component, but it could trickle down to Missouri tax implications because Missouri's tax

system is tied to the federal governments. So any sort of change there can have an impact on Missouri's budget and it might not be a small amount.

Susan Pendergrass (15:23)
You mean that Missouri would end up having to also not pay tax on tips?

Elias Tsapelas (15:27)
Well, just basically if you're not paying federal tax on something that will lower your gross income for Missouri tax purposes. And so then you would be paying less in Missouri taxes, meaning the state receives less revenue.

Susan Pendergrass (15:41)
So, then what are the major areas of this bill that will cost Missouri money?

Elias Tsapelas (15:46)
Well, so one of the biggest, would say, is depending on how the SNAP implementation goes. ⁓ If we get that, that shouldn't be too bad. What people are worried about on the Medicaid front is the change to provider taxes. What that's gonna do, Missouri gets...

Susan Pendergrass (15:53)
So if we get our error rate lowered though, it won't really cost us.

but didn't,

how did they get changed?

Elias Tsapelas (16:09)
So the max percent that states can have their provider taxes set at is now, current law is six percent, well, not current law, prior to the One Big Beautiful bill was 6 % and it's lowering the cap to 3.5%. And that's getting implemented over a few years. Currently, Missouri's is 4.2%. So we're not as, now Missouri's has been over five.

Susan Pendergrass (16:27)
wow.

Elias Tsapelas (16:37)
before and we're talking about this is money for hospitals in Missouri gets over 1.5. I think it's around 1.5 billion dollars per year from this. And so that that will be implemented over a couple of years. This is a rate that states change a lot. This isn't like our top income tax rate. This is something that every single year the rate is different. So Missouri is at 4.2 percent. And if they do have to go down with if they do have to lower it there is a cost there that I think a lot of people are hoping the

rural hospital fund will be able to fill that gap.

Susan Pendergrass (17:09)
How's the rural hospital fund? Okay, so the provider taxes that the hospitals can charge a tax on every service and then the federal government reimburses a larger bill because of the tax. How is the rural hospital bill going? I mean, the rural hospital fund going to work?

Elias Tsapelas (17:24)
So the Rural Hospital Fund, I think some of the details are going to still be ironed out, but generally it is going to basically give out, it's $50 billion and there's gonna be 10 billion distributed each year for five years. And it's going to be given out to states, I think proportional to the area of the state that's considered rural. And so I think it's going to benefit red states more than...

blue states typically just based, I think, on how it's designed. And then based off of what the CBO said when they looked at the bill, the change in Medicaid provider taxes by 2030, so the range that the rural hospital fund will be distributed, would only cost about 49 billion. So the hope is that $50 billion in a rural hospital fund is roughly enough to cover that.

or at least to help keep the hospitals open and do whatever, because it's not gonna have the same gamesmanship that the provider taxes have. It's just it is, so when a lot of people talk about how bad or how worried they are for hospitals, especially in Missouri, I think what they're most worried about is what happens after that five years, because the provider tax changes will be fully implemented.

Susan Pendergrass (18:34)
Hmm.

Elias Tsapelas (18:40)
and the rural hospital fund will not have funding anymore guaranteed. So, you know, I think some of the hope is that the provider tax changes, you know, get rolled back in five years or the rural hospital fund gets grown or, you know, refilled or, you know, sort of, you know, we'll see that. That is one big thing that I guess I should have noted on this bill is that there is a very complicated timeline of how things are going to be implemented, when they're supposed to expire.

You know, not everything here is it's going into effect tomorrow and it'll be there forever unless something changes. There's a lot of moving parts. And I think a lot of people that voted for the bill are also assuming some things will go away or maybe hoping for things to go away.

Susan Pendergrass (19:18)
like Missouri Senator Josh

Hawley, right? I do recall him saying that while he did not support the changes to the provider tax, he figures he's got five years to fix it.

Elias Tsapelas (19:29)
Yeah, I think there's some of that there. You know, there's definitely some pieces on, you know, how the work requirements are going to work. Some of the tax pieces that are temporary. I think some people would like to make permanent later. You know, the first time the Trump tax cuts went into effect, you some of the standard deduction changes, you know, weren't permanent. I mean, that's a big reason why we're having all this discussion right now anyways. And so just to meet the kind of arbitrary

budget rules that they need to meet for the 10 year requirement. We just have a lot of kind of complicated things. And so we have, you know, we have a big window where we're going to see what states can do IT wise. And, know, we're going to see how it's going to impact states. You know, there's a lot going on economically. You know, Missouri's budget has a lot of facing a lot of headwinds just generally. And so this is going to bring some other changes, more work in Jefferson city, potentially more costs. But if.

If things go well and the IT is better than maybe I think it is, it might not actually be that big of a deal and a lot of Missourians will get a tax cut, but we'll have to see.

Susan Pendergrass (20:30)
I mean, was sort of a, there was a little bit of political, it's because folks voted for this administration and it was clear that these were the things that they wanted to do. Right. And it reminds me of what's happening with the department of education where they're cutting 12 billion from the department's budget. They're going to cut a lot of programs that Missouri receives funds for, and they're not going to get them anymore. And Missouri is going to have to decide which education programs they really, really want without

federal funding and they're going to have to want them enough to pay for them. And that was something that was part of the Republican platform and they won. So they're implementing essentially what they said they were going to do. I will say that one thing in the that that passed along with this bill is that Missouri's current tax credit scholarship program, most scholars, where people can give a donation to one of six scholarship organizations across the state.

and get a dollar for dollar tax credit on the Missouri taxes, I think that we are well positioned to now give folks also a dollar for dollar tax credit on their federal taxes because about, I think it's four billion or so in this bill for federal tax credits for scholarship granting organizations. So I assume that Missouri will be one of the states that gets on this right away and that we become one of the states where people can get that credit and can double, you know,

double the amount that they can take off their taxes when they donate to these organizations. So I kind of thought that was going to get dropped by the bird rule, but it didn't get dropped. It's in there. So hopefully that's going to be a benefit to us. But I guess we'll just have to see how it goes. mean, to your point, by messing around with timelines and whatnot, they change the fiscal note on this thing, right? And what's the cost and how are they going to make it back up?

And there's a lot of political shenanigans going on, but I guess we'll just have to see how it all falls out. But Medicaid is a program that you tell me, you know way more than I do. If we just let it keep growing on track, if we just keep covering more and more people, it's gonna implode, right?

Elias Tsapelas (22:35)
There's just so many problems if we can't figure out what's going on with Medicaid. mean, it's growing. Well, it's it's taking up so much of Missouri's budget. It's going to continue taking up a large part of the budget. I mean, part of it is that in Jefferson City, at least lately, it's something that, you know, whenever the it's time to debate the budget, it's just sort of.

Susan Pendergrass (22:40)
Hope you're enjoying.

Elias Tsapelas (22:58)
All right, well, how much more is Medicaid going to cost this year? You know, now let's figure out what we have to do elsewhere because, you know, our hands are sort of tied. And so I think, you know, some of these changes, at least something I'm sort of looking forward to is that, you know, it's actually going to have to. The legislature is going to have to go back to the drawing board and say, you know, hey, like, do we need to keep doing these things the way we are? Like, can we find ways to, you know, provide better care?

you know, more cheaply, you maybe manage care, you know, the idea of paying for people's health plans as opposed to paying for services. You know, maybe maybe that doesn't work. You know, maybe there are some services that, you know, aren't actually paying off the way that we thought they would. And I think that's going to happen across across the budget, you know, because you're also going to have the state having to consider, you know, are we going to keep letting

you know, Missouri's tax code mirror the federal's, you know, there's going to be a lot of tax changes there. And especially at a time where, you know, the state fiscal year just ended, our revenues were essentially flat. think revenues for the year grew at 0.1%, which is actually a little bit higher than some people thought they might, completely. ⁓ Well, that I mean, back in January, they thought revenues were going to decline. So, you know, just economic economic

Susan Pendergrass (24:10)
Why? Why was it flat?

Wow.

Elias Tsapelas (24:21)
basically just how it looked, things were going. We also were on kind of a historic run of revenue growth. And so it was kind of destined to turn around, but if you consider healthcare costs are growing over five plus percent per year, you have to fund the formula, increase the formula so much per year. Everything can't continue costing more every year if the federal government isn't gonna give us more or...

Susan Pendergrass (24:28)
Okay.

Elias Tsapelas (24:46)
revenues aren't going to go along with it. And so I'm happy that there will be some discussions on some of these topics because they have been absent in Jefferson City in recent years. And, you know, a lot of times the kind of the forced deadlines do bring some action. So I am looking forward to that.

Susan Pendergrass (25:02)
That's going to be interesting to watch. Well, thanks for coming on and telling me about it and our listeners, because I sure do hear it being talked about a lot, and I'm not sure I'm completely clear on it. But I guess we'll see how it goes. I'll be really curious to see what Missouri does with it. But thanks so much, Elias.

Elias Tsapelas (25:16)
No problem. I think we're all looking forward to seeing what happens next.