States seek Medicaid flexibility, guarantee on federal support

September 1, 2012

Ryan's proposals for radical changes in Medicare and Medicaid are at the center of the presidential campaign.

WASHINGTON - Republican presidential candidate Mitt Romney selected Rep. Paul Ryan as his running mate, putting Ryan's proposals for radical changes in Medicare and Medicaid at the center of the presidential campaign.

As the debate continues, state governors and health officials are weighing their choices. Medicaid expansion may seem like an attractive course, as the Patient Protection and Affordable Care Act (PPACA) authorizes the federal government to shoulder 100% of added costs of coverage from 2014 to 2016.

But state officials question whether the estimated $1 trillion will be there if the Romney/Ryan ticket wins, or whether Congress will reduce federal funding for Medicaid in any case. So far, only a dozen or so states have committed to expanding their Medicaid programs.

CHANGING STRATEGIES

To spur state action, Cindy Mann, director of the Center for Medicaid and CHIP Services and deputy administrator of the Center for Medicare & Medicaid Services (CMS), clarified last month that states can expand Medicaid to cover adults up to 133% of the federal poverty level (FPL) in 2014, and drop expanded coverage later if they wish. Mann also emphasized at the meeting of the National Conference of State Legislatures (NCSL) in August that there is no deadline for states to make decisions on Medicaid expansion, unlike requirements for establishing state-based insurance exchanges by Jan. 1, 2014.

State officials also would like to be able to expand coverage to less than 133% of FPL, and the NCSL adopted a resolution urging Congress to provide states with such flexibility. But that possibility remains uncertain, along with a number of other issues.

The most pressing need, according to Mann is for states to modernize Medicaid eligibility systems to interface with exchanges.

"With or without expansion, states are moving from paper to data-driven systems and online applications," she said at the conference.

And CMS is making "fundamental changes" in how it does business with states, simplifying the wavier process and moving business operations to the Web.

States still face extensive requirements under PPACA to overhaul systems for determining Medicaid eligibility and for enrolling individuals and families. The new systems must coordinate enrollment across Medicaid, the Children's Health Insurance Program and state insurance exchanges. New methodology-modified adjusted gross income-must be used to determine income eligibility for Medicaid and health subsidies. CMS is providing states with additional funds to do this.

Even with updated IT operations, the process of managing new enrollment will add to costs, according to an August 1 report by the Government Accountability Office on state Medicaid expansion. States are unclear how they will shift Medicaid enrollees into health benefit exchanges and how to plan budgets to cover new benefit packages and revised federal matching rates.

Regardless, there will be more Medicaid managed care, according to Margaret Murray, CEO of the Association for Community Affiliated Plans, and MHE editorial advisor. She expects 90% of all Medicaid beneficiaries will be in some kind of plan by 2014. Kansas, for example, recently requested a waiver from CMS to shift all Medicaid patients in the state into managed plans.

A main advocate for Medicaid expansion is hospitals and providers, which otherwise face severe rate cuts. PPACA phases out payments to hospitals to cover costs for providing care to the uninsured, on the assumption that broader Medicaid coverage will reduce uncompensated care. Hospitals provided about $40 billion for that purpose in 2010, according to the American Hospital Assn., and without expanded coverage will face huge revenue losses.

The uncertainty surrounding Medicaid policies is an "incentive for delay in implementation, no matter who is elected president," said Dan Crippen, executive director of the National Governors Assn. A lot of states won't be ready for expansion by 2014, he predicted, even if they want to implement it.

BROADER REFORMS

Ryan has opened the debate about the pros and cons of adopting his controversial "block grant" proposal, which would shift Medicaid away from a federal matching formula. Similar reforms have been proposed since the Reagan administration, and President Bill Clinton vetoed a Republican block grant plan when he was in office.

Ryan describes his approach as providing flexibility for states to tailor a Medicaid program to fit the needs of "their unique populations."