CMS Points to New Flexibility for States Under Health Reform's Medicaid Expansion

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CHICAGO--A senior Centers for Medicare & Medicaid Services official told state lawmakers Aug. 6 the federal government would permit states forgoing Medicaid expansion under the Patient Protection and Affordable Care Act to enroll in the expanded federally backed insurance program at a later date.

The official also hinted that CMS might permit states to partially implement the Medicaid expansion scheme envisioned under health reform.

Cindy Mann, director of the Center for Medicaid and Children's Health Insurance Program Services at CMS, outlined a much more flexible approach to Medicaid expansion than many governors and state legislators had previously assumed. She said CMS has been studying the U.S. Supreme Court's recent ruling with respect to Medicaid expansion and has determined the court intended for “a truly voluntary expansion.”

In line with that view, Mann said CMS would permit states to refuse the government's funding and technical assistance for Medicaid expansion, but join the program at a later date. Similarly, states enrolling in the Medicaid expansion would be able to drop the program at a later date.

“In other words, it is a truly voluntary expansion,” Mann told lawmakers attending the National Conference of State Legislatures (NCSL) annual meeting here. “You can come in, in time for January 2014. You can come in later, if you choose to. You can not come in at all, if you choose to. And if you come in, you can choose to leave. We think that is consistent with the nature of the court's decision to make it a voluntary program.”

Under PPACA, states were required to expand their Medicaid programs to all adults with incomes up to 133 of the federal poverty level. The federal government plans to fully fund the expansion during the first three years, but federal support would drop incrementally in subsequent years, falling to 90 percent by 2020. The U.S. Supreme Court, however, ruled in late June that the federal government could not remove all Medicaid funding from states that refuse to expand their programs (125 HCDR, 6/29/12). This component of the ruling has caused several governors and state legislators to say they would reject the opportunity to expand their programs.

NCSL released a legislative report showing 20 states had already enacted laws opposing some aspect of PPACA. Within that group, Missouri, Montana, New Hampshire, Utah, and Wyoming barred their states from further implementation activities without approval by their legislatures. Another 27 states considered legislation opposing PPACA but never enacted laws.

Mann said CMS respects the decisions being made by governors and legislatures across the country. She said CMS does not intend to establish deadlines for states to decide on their implementation strategies, but noted states will miss out on federal funding if they wait to expand their Medicaid activities.

“Most states are taking their time to look and consider and think about what it means, how many people, what the dollars are, what the options are,” she said. “We strongly encourage you do just that. And we want to be very helpful as you do that.”

'Partial Implementation.'

Mann also pointed to an emerging view that states should be given authority for “partial implementation.”

Mann said CMS is examining a recent report by the Congressional Budget Office and the Joint Committee on Taxation (JCT) that examined the budgetary impact of PPACA. The analysis also suggested that states might choose to partially implement the Medicaid expansion component. Mann said CMS would study the CBO report and related opinions coming from legal observers to determine whether additional flexibilities for Medicaid expansion should be provided to the states. She said CMS would provide further guidance on this question in the coming months.

Mann stressed that CMS is interested in helping states conquer their implementation challenges. She characterized the reforms and the expansion envisioned under Medicaid as a terrific opportunity for the states to provide a more complete package of health services to their residents at a reasonable price.

“The program you have known--maybe even the program you have in your state today--is not the program that is envisioned for 2014,’’ she said. “It will not be your grandmother's Medicaid program in many ways: in terms of how health care is delivered; how care is paid for; how we at CMS do business with states; and, how you at the state level do business with providers and beneficiaries.”

Federally Facilitated Exchange on Track.

Michael Hash, CMS’s interim director of the Center for Consumer Information and Insurance Oversight, said a large number of states have taken steps to develop health insurance exchanges by 2014, as required under the PPACA. He said CMS is prepared to integrate noncomplying states into the federally facilitated exchange, which is on track to commence operation by October 2013.

“We know that some states will need additional time and assistance before they are ready to run their own exchanges,” Hash said during the same NCSL panel discussion. “They may choose to work in partnership with HHS to operate a federally facilitated exchange. We have seen impressive and good progress in the establishment of state-based exchanges and we expect to see more now that the Supreme Court has provided a clear and final decision.”

Hash said there are 19 states that have secured either legislative authority or an executive order permitting the establishment of a state-based exchange. He noted that 34 states and the District of Columbia have received $850 million in federal grants to assist in the development of state-based exchanges. CMS recently announced such funding would be available to the states through the end of 2014.

By Michael Bologna