Medicaid—a federal/state partnership with shared authority and financing—is a public health coverage program for low-income children, their parents, the elderly and people with disabilities. Medicaid pays for health and long-term care services for more than 55 million people. Although participation is optional, all 50 states participate.
Eligibility varies widely among states because, although states must meet federal minimum requirements such as covering certain people and offering specific benefits, they may also choose to cover additional “optional” people and services. Provisions of the Patient Protection and Affordable Care Act (PPACA) expanded Medicaid to all Americans under age 65 whose family income is at or below 133 percent of federal poverty guidelines ($14,484 for an individual and $29,726 for a family of four in 2011) by Jan. 1, 2014. Under PPACA, states failing to participate in this expansion would risk losing their entire federal Medicaid allotment.
The Medicaid expansion provision of the federal health reform law led to challenges that rose to the Supreme Court where, on June 28, 2012, the court ruled that Congress may not make a state’s entire existing Medicaid funds contingent upon the state’s compliance with the PPACA Medicaid expansion. In practice, this ruling makes the Medicaid expansion a voluntary action by states.
The Court's decision sparked many questions from state policymakers. In a series of letters, the Department of Health and Human Services (HHS) has begun to clarify its interpretation of the ruling. In the initial letter on July 10, HHS Secretary Kathleen Sebelius addressed the decision and the next steps. Furthermore, responding to a letter from the Republican Governors Association (RGA) requesting additional guidance from the Obama administration, Marilyn Tavenner, the acting administrator of the Centers for Medicare and Medicaid Services, clarified in a letter that no deadlines had been set for states to make a decision concerning the expansion of their Medicaid programs.
The optional expansion is not the only PPACA-related Medicaid change state policymakers face. The law also made several changes that influence Medicaid operations and the program’s cost to states. The federal health reform law:
Modifies how income is calculated for most Medicaid applicants, including those in the new eligibility group. Beginning in 2014, states must use Modified Adjusted Gross Income (MAGI) to determine eligibility of most applicants. MAGI is adjusted gross income as defined in the Internal Revenue Code, modified by applying a 5 percent “disregard.” This method eliminates resource tests. The combined effect of requiring coverage for people with incomes up to 133 percent of poverty and then use of MAGI budgeting effectively raises the income level for most Medicaid applicants to 138 percent of poverty.
Requires that states maintain eligibility standards that were in place as of March 23, 2010.
Provides all newly eligible adults with a benchmark benefit package that meets the minimum essential health benefits that will be available in the new health insurance exchanges.
Requires states to improve outreach and enrollment for Medicaid and to coordinate Medicaid eligibility with the new health benefit exchange, which must be operational by 2014.
Reduces Medicaid disproportionate share hospital (DSH) allotments.
Increases primary care provider payments fora two year period.
Expands state options for home and community-based services.
For a complete list of PPACA Medicaid provisions, please click here.
States remain the laboratory of innovation for Medicaid and are not waiting for implementation or repeal of PPACA to address Medicaid issues. State lawmakers are exploring innovative ways to improve the value of the Medicaid program. To improve quality, states are aligning incentives with their desired outcomes and experimenting with new payment models, such as attaching provider payments to patients’ health outcomes. There are also adopting new delivery systems by creating medical homes and streamlining services for those eligible for both Medicaid and Medicare.
For more information on state Medicaid actions, please refer to the right-hand column for additional NCSL resources
New NCSL Resources
The Heat Is On - State Legislatures Magazine (December 2012)
A new way to identify areas with large numbers of high-cost Medicaid patient may improve their health while saving states money.
Confronting Costs - State Legislature Magazine (June 2012)
The state’s share of the joint state-federal program accounts for an average of 15 percent of state general funds and about 21 percent of total state spending when federal funds are added to the mix. In 2009, the states’ share of the Medicaid tab reached $123 billion, a hefty expenditure, given that states faced $117.6 billion in budget gaps that year.
Medicaid "Best Buys": Getting the Most From Your State's Medicaid Money - Audio file from Legislative Summit 2012
States and health plans can "bend the curve" in the growing costs of Medicaid by strategically using managed care tools, providing intensive care management programs for their highest-risk populations, integrating Medicaid and Medicare services, preventing fraud and abuse and targeting resources where they will add the most value. Experts discuss these five successful strategies to improve the effectiveness and efficiency of Medicaid.
Containing Medicaid Costs: Moving Toward Medicaid Managed Care - Webinar (April 2012)
Nationally, about 66 percent of all Medicaid beneficiaries are enrolled in managed care, but the most expensive of beneficiaries—the elderly and people with disabilities, who account for three quarters of Medicaid spending—are traditionally served through fee-for-service programs. As states look for ways to balance their budgets, there is increased interest in expanding managed care to these additional populations. This webinar highlighted a variety of issues related to serving these populations in managed care plans.
Containing Medicaid Costs: State Strategies to Fight Medicaid Fraud and Abuse - Webinar (March 2012)
Across the nation, states are looking to contain the rising cost of Medicaid. State programs to control fraud and abuse—designed to prevent, identify, and prosecute improper payments and unlawful behavior that increase health care costs—offer an approach that everyone can support. Learn about new opportunities under the Affordable Care Act and hear what states are doing to prevent Medicaid fraud and abuse, recover improper payments, and address these issues in Medicaid managed care programs.
Medicaid: The 800-Pound Gorilla (State Legislature Magazine October/November 2011)
Although many of the headlines in the debate over federal spending and the deficit focus on Medicare and Social Security, the program of greatest concern to states is Medicaid.
The 46-year-old program, which cost state and federal governments nearly $400 billion in 2009, eats about 16 cents of every dollar in state general funds. It’s been growing two or three times faster than state budgets because of the rising costs of health care and the increasing number of people enrolling because of the stagnant economy.
Meanwhile, state lawmakers are looking down the road three years to when an additional 16 million people will go onto the Medicaid rolls under federal health care reform. And while Congress debates possible modifications in how it funds the program, any changes remain uncertain.