Kansas Asks for Complete Waiver From Medicaid MOE Requirements

Health Care Policy Report™ offers the inside story on health care regulation and policy, with behind-the-scenes news and analysis of developments in Congress, the federal agencies, and the...

ST. LOUIS--Citing the state's difficulty in meeting federal Medicaid requirements amid current budget difficulties, Kansas Gov. Sam Brownback (R) announced March 10 that he asked the Department of Health and Human Services to grant a complete waiver of federal maintenance-of-effort (MOE) requirements for the state's Medicaid program and to provide funding for the program in the form of a block grant.

Brownback's request, in a letter dated March 9, concerned MOE provisions in the American Recovery and Reinvestment Act and the Patient Protection and Affordable Care Act, under which the states will lose federal Medicaid funding if they tighten eligibility rules.

Although Kansas will increase Medicaid spending in fiscal year 2012 by $265 million, to a total of $1.14 billion, it will be required to use a combination of budget cuts and one-time borrowing to sustain the program in its current form, Brownback said. And in the ensuing years, the state faces likely deficits of $500 million, largely resulting from continued Medicaid increases, he said.

Given the bleak budget picture and the state's obligation to produce a balanced budget, the Medicaid program must undergo significant changes, he said. But federal MOE requirements currently are locking the state into “an out-of-date, oversized, and unaffordable program,” he said.

“Most concerning to me is that the huge increases render the MOE standard unachievable, threatening the loss of the Medicaid program for vulnerable Kansans who are already in the program,” Brownback said. “This is an unsustainable path, and I believe there are workable alternatives.”

Brownback acknowledged that HHS Secretary Kathleen Sebelius--a former Kansas governor--has recently offered to help “identify savings opportunities and maximize flexibility” in the Medicaid program, but said he was convinced that 45 years of federal requirements culminating in the MOE was “too great a hurdle.”

“Kansans have embraced the responsibilities associated with providing health care to the Medicaid population,” Brownback said. “To succeed in meeting those obligations in the future, we will need the kind of meaningful flexibility that only a block grant and relief from the maintenance of effort requirements can provide. With that flexibility, our state will be able to provide superior service to our neediest citizens.”

Governors Want MOE Rules Lifted.

Brownback's request for a waiver from MOE rules echoed a January request from 33 Republican governors and governors-elect for the lifting of the MOE rules.

As a result of the federal government's “one-size-fits-all approach” to Medicaid, governors are forced to cut other “critical state programs,” such as education, the governors said in a letter to House and Senate leaders and the Obama administration.

In his letter to HHS, Brownback said that Kansas's Medicaid spending grew 33 percent from 2002 to 2008, from $1.8 billion to $2.4 billion, while enrollment in the program increased 25 percent, from 234,000 to 293,000. And since 2008, when the MOE requirements were put in place, spending has grown nearly 17 percent and enrollment 18 percent, he said. “These numbers are not sustainable in the world of balancing state budgets,” he said.

In late February, the Centers for Medicare & Medicaid Services at HHS outlined states' options for changing Medicaid and Children's Health Insurance Program (CHIP) eligibility rules under the MOE requirements included in the health reform law. In a letter to state Medicaid directors, CMS answered a series of frequently asked questions about the MOE requirements including when states can ask for an exception, how the requirements affect expiring coverage expansions, and whether states can increase premiums charged for coverage.

And HHS in mid-February told Arizona, which had asked the department to waive the MOE requirements, that it could reduce coverage for populations eligible for Medicaid under a demonstration program that expires Sept. 30 without running afoul of the law.

Governor Favors Block Grant Funding.

Brownback said that block-grant funding for Medicaid would give the state the flexibility it needs to operate the program effectively within its budget constraints.

In making that request, Brownback was echoing the recently expressed support of some Republican governors for block grants as a way of giving states greater flexibility in the Medicaid program to control costs. At the February meeting of the National Governors Association, some Republican members of the group's Health and Human Services Committee came out strongly in support of block grants.

“We need to address all aspects of Medicaid--eligibility, benefits, administrative structure, and regulations,” Brownback said. “In addition, Kansas faces a large and growing budget deficit due in large part to the growing costs of Medicaid. Therefore, I am asking you and your team to provide maximum flexibility for Kansas with a global block grant for Medicaid and a complete waiver of the Maintenance of Effort requirements.”

Waivers From Health Reform.

Brownback's request for a waiver came less than two weeks after President Obama agreed, in remarks at the February meeting of the NGA, to support bipartisan legislation that would give states broad authority to apply for waivers from major provisions of the health reform law starting in 2014, as long as the states could meet important tests.

Obama also called for the creation of a bipartisan group of governors to work with Sebelius to lower costs and improve the quality of care for dual eligibles, beneficiaries of both Medicare and Medicaid, who make up 5 percent of enrollees but account for half of Medicaid costs.

Administration officials speaking on background told reporters after the president's remarks that Obama does not favor proposals for Medicaid block grants, out of concern that block grants could leave children vulnerable.

'Beginning of a Conversation.'

Judith Solomon, vice president for health policy with the Center on Budget and Policy Priorities, told BNA March 16 that it was difficult to assess Brownback's letter without knowing details about the waiver request that have not yet been revealed.

“This is not a formal waiver request, but rather the beginning of a conversation with the CMS about what kind of waiver would be possible under the Obama administration,” Solomon said, adding that a formal waiver request would identify the specific requirements that would be suspended under the waiver, and would provide extensive budgetary information to demonstrate that the waiver would be budget-neutral.

Solomon noted that Brownback used the terms “global block grant” and “complete waiver,” suggesting that a comparison to a waiver granted by the Bush administration to Rhode Island was perhaps intended. “But that was a different administration with different priorities, and I'm not sure that the Obama administration would be willing to go down that route,” she said.

Solomon said that the Bush administration had been generally favorable to the idea of giving states block grants for Medicaid, and allowing them flexibility in designing their programs. “There may have been a strategic reason to give Rhode Island a waiver and a kind of block grant,” she said. “It's a small, relatively liberal state, and so the cost would not be that high for the federal government, and it would help bolster the case for block grants.”

Officials in other states, including New Jersey, have indicated that they intend to seek Medicaid waivers, but as of yet have revealed similarly few details, Solomon said. “Gov. [Chris] Christie in New Jersey said he would seek a 'global waiver,' but also said that it would not be modeled on the Rhode Island waiver,” she said. “We're going to have to see more details on these waivers to really understand what they're looking for.”

Solomon added that the current discussion of block grants among in Washington among policymakers and in Congress is focused on reducing federal spending. “These requests from the states are more than likely driven by the needs of the states to control their budget problems, rather than being focused on federal concerns,” she said. “And the current administration is probably not looking to make a deal like the one with Rhode Island.”

Matt Salo, executive director of the National Association of Medicaid Directors, told BNA March 15 that Brownback's request emerged from real budgetary issues faced by his state, and that similar request from other states would probably be seen.

“There are structural issues going on, given the trajectory of how revenues fundamentally changed in this recession, and how Medicaid expenses are expected to grow in coming years,” he said.

“Every state will be different, but a lot of them will be looking for more flexibility with which to right the ship.”

By Christopher Brown

The Kansas waiver request letter is at http://op.bna.com/hl.nsf/r?Open=bbrk-8euv7l.