Feds to States: No Option for Partial Medicaid Expansion and More
After months of questions from states about flexibility to partially expand their Medicaid programs—up to 100 percent of federal poverty guidelines, instead of the 133 percent in the PPACA law, for example—the Centers for Medicare and Medicaid Services (CMS) finally responded: No, at least until 2017, when states can apply for waivers on a wide assortment of provisions of the Patient Protection and Affordable Care Act (PPACA).
States are conducting fiscal analysis and weighing their options. Florida State Representative Matt Hudson, co-chair of NCSL’s Standing Committee on Health says, “given that it [the Medicaid expansion provision] is optional, I’m not surprised at all. Florida is in the process of evaluating this option now and we will continue to make sure our state is fiscally viable for the long-term.” Texas State Senator Leticia Van de Putte, thinks the “decision has confirmed exactly what is at stake here – without full implementation of Medicaid expansion, 4.4 million Texans will continue to lack access to preventive healthcare, be unable to afford life-saving treatments and medications, and have no choice but to rely on costly emergency rooms as a last resort. The burden of that costly ER treatment would continue to fall on local communities. It is all or nothing, and Texas simply cannot afford to do nothing.”
In their Frequently Asked Questions document released Dec. 10, CMS said “Congress directed that the enhanced matching rate be used to expand coverage to 133% FPL. The law does not provide for a phased-in or partial expansion. As such, we will not consider partial expansions …”
The Department of Health and Human Services (HHS) released several additional documents to clarify health reform implementation activities and help states plan for the coming budget cycle. Important highlights include conditional approval of six state-based exchanges and—some say—a final denial that the federal government will offer states a “blended rate” for their Medicaid and CHIP contributions. The blended rate, under which states would receive a blend of their Medicaid and CHIP matching rates in a lump sum, has been floated in Congress as a way to reduce federal Medicaid outlays but widely rejected by governors who see it as shifting costs to states.
Inside This Issue
HHS Approves Exchanges in Six States; New Jersey Gov. Christie Vetoes State-Exchange Bill
Six “early applicant, early approval” states got the endorsement of HHS to move forward with their health benefit exchanges this week. Colorado, Connecticut, Maryland, Massachusetts, Oregon and Washington are on track to meet HHS’s exchange deadlines, including that they have the systems in place to begin enrolling consumers in October of next year. Each of these states will run its own exchange.
States have until December 14 to declare their intentions. HHS is reviewing formal plans from other states, but has not yet announced its decisions. HHS Secretary Kathleen Sebelius said the department intends to “make many more announcements like this in the weeks and months to come and expects that the majority of states will play an active role operating their exchanges.”
According to NCSL tracking, as of Dec. 13, 19 states and the District of Columbia are planning for a state run exchange, 21 states are opting for a federally facilitated exchange, five have not declared their intentions and another five have decided to pursue a partnership exchange working with the federal government to run certain functions. Most recently, New Jersey Governor Chris Christie vetoed a bill (S2135) to set up a state-based exchange, for the second time this year. In his veto statement, the governor said he did not think the state had enough information to run its own exchange: “Absent this critical information about cost, cost-sharing, scope of control and the federal rulemaking landscape, New Jersey cannot fairly evaluate the best or most fiscally prudent path to follow for its residents.” Christie based his May veto of similar legislation on the need to wait until the Supreme Court ruled on PPACA.
PPACA Taxes Effective in January
Several new taxes passed as part of the federal health reform law take effect in January. Certain provisions will affect only high-income earners. These revenue-raising measures will help finance PPACA’s aim to provide or subsidize health insurance for the uninsured.
Medicare Payroll & Investment Tax. Individuals who make more than $200,000 per year and couples bringing in over $250,000 will pay an increased Medicare payroll tax. A bit like the payroll tax for Social Security, a worker’s first $200,000 is taxed at the current rate. Earnings beyond that threshold are subject to an additional 0.9 percent tax. The same group of earners also will be subject to an increased net investment income tax on unearned income. The government will collect 3.8 percent more from these earners on net investment income, which includes interest, dividends, capital gains and passive revenue-generating activities.
Medical deductions and flexible spending. Tax deduction changes for everyone go into effect in January. Currently, taxpayers can deduct out-of-pocket medical expenses that exceed 7.5 percent of their adjusted gross income. In January, the floor rises to expenses that exceed 10 percent of adjusted gross income. This means people will have to spend more on health-related expenses before they are able to claim those expenses as a deduction. People 65 and older are not subject to the increase until 2017. Workers also will see the maximum pretax contribution to flexible spending accounts for medical expenses fall to $2,500 annually.
New excise taxes. A new 2.3 percent tax will be imposed on the earnings of medical device manufacturers. A 10 percent excise tax on indoor tanning services went into effect on July 1, 2010.
New Report Offers To-Do List for States Hoping to Partner on Exchanges
The Robert Wood Johnson Foundation’s State Health Reform Assistance Network released a report in November intended to be a guide for states planning to partner with the federal government to operate health exchanges. The report, State Tasks for Partnership Exchange, includes several important procedural and administrative questions state agencies and legislators must answer to run a partnership exchange. The report also examines the components Medicaid and CHIP programs must have in place to interface with the exchange
Medicare “donut hole” discounts go up in 2013
The higher prescription drug discount for many seniors and people with disabilities on Medicare will begin January 1, 2013. With a goal of closing the prescription drug coverage gap or “donut hole,” the discount on brand-name drugs goes from 50 percent in 2012 to 52.5 percent in 2013. For generic drugs, which represent about three-fourths of the market, the benefit jumps from 14 percent in 2012 to 21 percent in 2013.
When Congress created the Medicare Part D Prescription Drug benefit in 2003, funding constraints led to a complex formula that required most Medicare enrollees to pay a deductible, monthly premiums, copayments and, in addition, 100 percent of the cost of all drugs purchased within the "donut hole," which were all drug expenditures that fell between $2,840 and $6,447.50 in 2012.
With the PPACA discounts, about 2.8 million enrollees saved an average of $677 in the first 10 months of 2012. For 2013 the “donut hole” applies to purchases between $2,970 and $6,733.75 annually.