HHS Tells States It Will Not Fund Partial Medicaid Expansion
By Phil
Galewitz and Mary
Agnes Carey
KHN Staff Writers
Dec 10, 2012 - Kaiser Health News
Updated at 7:17 p.m.
The Obama administration answered a key question from governors on Monday
with a clear "no": States may not expand Medicaid only part of the way and still
get the additional federal funding provided in the Affordable Care Act.
The decision, announced by Health and Human Services Secretary Kathleen
Sebelius in a letter sent to governors, is significant because after the
Supreme Court ruling in June made the Medicaid expansion optional, several
states have floated the idea of a less generous expansion than called for in the
federal health law.
The health law requires Medicaid to expand in 2014 to cover anyone earning up
to 138 percent of the federal poverty level, or nearly $32,000 for a family of
four. Monday's decision from HHS means that states will not be able to expand
the program up to, for instance, 100 percent of the federal poverty level, and
still receive the full funding provided by the health law.
Under the law, the federal government will cover all of the costs of the new
Medicaid beneficiaries from 2014 to 2017; it then phases down to 90 percent of
funding in 2020, with states picking up the rest of the tab. However, the
Supreme Court last summer ruled that states could not be compelled to expand
their programs at the risk of losing the rest of their Medicaid funding. The
Supreme Court decision left many questioning just how flexible the expansion of
Medicaid could become.
HHS said the states could seek a waiver in 2017 for a partial expansion.
However, states will only be able to get a waiver if they can show they would
still be providing similar coverage and benefits as called for under the law.
That means a state would have to find a way to cover people up to 138 percent of
poverty level if it chooses not to make that group eligible for Medicaid.
Cindy Mann, who oversees Medicaid as deputy administrator of the Centers for
Medicare and Medicaid Services, said the health law does not allow the
administration legal flexibility to permit a partial expansion while the federal
government is paying the full cost of expansion. She refused to say whether the
decision would limit the number of states that expand Medicaid starting in 2014.
"We are optimistic that they (states) will move forward."
Matt Salo, the executive director of the National Association of Medicaid
Directors, said while HHS did not give an answer that "a number of states were
hoping for, the clarity of the answer is important for all states currently
preparing their budgets for next year."
In a posting on the HealthCare.gov blog, Sebelius said that "while
the law does not create an option for enhanced match for a partial or phased-in
Medicaid expansion c we will consider waivers at the regular matching rate now
and, in 2017 when the 100 percent federal funding for the expansion group is
slightly reduced, broad-based State Innovation Waivers."
The Sebelius letter to governors comes nearly a month after the Republican
Governors Association sent a letter to the White House with requests regarding state
implementation of the health law. The Republican governors, who will lead 60
percent of states starting in January 2013, posed 20 questions regarding
exchange implementation and 14 regarding Medicaid expansion and stated that they
would not be able to move forward unless the questions were addressed by HHS.
Louisiana Gov. Bobby Jindal, the RGA chairman, criticized the HHS decision.
"The Obama administrationfs refusal to grant states more flexibility on Medicaid
is as disheartening as it is short-sighted," Jindal said in a statement. "The
president knows the current Medicaid system is broken, and it is an inefficient
mechanism for expanding coverage. While the administrationfs answer will make a
statefs decision on Medicaid expansion more difficult, governors will continue
to ask the president to pursue real Medicaid reform and we hope he will join
us."
Sebelius also said the administration would not seek to reduce federal
Medicaid funding to states by blending various Medicaid matching rates —the
regular Medicaid rate, the enhanced Medicaid rate under the law and the rate
under the Childrenfs Health Insurance Program.
The "blended
rate" had been floated as a way to help reduce federal Medicaid spending and
cut the federal deficit.
"In essence it seems like it's taking Medicaid off the table" in any
discussion of controlling Medicaid spending as part of the fiscal cliff, said
Nina Owcharenko, director of the conservative Heritage Foundation's Center for
Health Policy Studies.
Salo also noted the announcement about blended rates. "Governors and other
state officials have been voicing their strong concern over that proposal, and
others (like provider tax reductions), that would simply shift costs to states
and could negatively impact their decisions on the expansion option."
At least nine states including Texas and Florida and have said they would not
expand Medicaid, because they worry about costs the state would face,
particularly when federal funding pares down starting in 2017.
Seventeen states have said they will participate in the Medicaid expansion,
according to consulting firm Avalere. Most states are still undecided, and they
have no deadline to make a decision.
In her blog post, Sebelius outlined other points of the guidance being
provided to states and gave a conditional approval to exchange plans submitted
by Colorado, Connecticut, Massachusetts, Maryland, Oregon and Washington.
That announcement came just hours after Tennessee and West Virginia became
the latest states to reject doing a state-run online marketplace. Only 14 states
and the District of Columbia have committed
to building a state exchange. Friday is the deadline for states to decide.
States have until February to decide if they want to build an exchange in
partnership with the federal government. If neither option is chosen, the
federal government will operate an exchange in their state.
The Obama administration this summer said states could decide to expand
Medicaid in 2014 — with the full federal funding — and then drop it at a later
date. But such a decision is politically risky, because state officials donft
want to be in a position of eliminating coverage.
Bruce Siegel, CEO of the National Association of Public Hospitals and Health
Systems, said he was thrilled with Mondayfs decision.
"We are greatly encouraged by the Centers for Medicare & Medicaid
Services' decision today to pursue an expansion of Medicaid consistent with the
scope of the Affordable Care Act," he said in a statement. "The agency's
guidance follows the letter and spirit of the law and takes an important step
toward significantly reducing the ranks of the uninsured."
"We look to the promise of reform to expand health care coverage as broadly
as possible and call on lawmakers to preserve the funding we have."
Judith Solomon, vice president for health policy at the left-leaning Center
on Budget and Policy Priorities, said the decision will remove a big uncertainty
facing states about the Medicaid expansion. It would also help interested
parties such as hospitals and consumer groups which are about to start lobbying
states to expand Medicaid.
"The problem has been a lack of clarity and this decision drives clarity on
what the rules of the game are," Solomon said.
She said the question over whether states could partially expand and still
get the extra federal Medicaid money has been a distraction to groups pushing
for states to participate in the expansion. "Now we know if states want the
higher federal match rates you are not talking 100 percent or 90 percent or 75
percent (of the federal poverty level), you have to cover the intended
population."
Sara Rosenbaum, health policy professor at George Washington University,
downplayed the political implications of the decision.
"I realize that there will be many people who think that this was a highly
political call. I think that is not true," Rosenbaum said. "I think this is a
case where the administration made absolutely the correct and essential legal
call. What (states) canft do is get the enhanced rate for doing anything other
than what Congress specifically tied the enhanced rate to. Itfs one of those
times – I realize there are few of them in Washington, D.C. -- when the law is
quite clear."
© 2012 Henry J. Kaiser Family Foundation. All rights
reserved.