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Strategy 1: Medicaid Maximization

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Description of Strategy

Many states may be providing services (funded through state "general funds") that are potentially reimbursable through Medicaid; Medicaid maximization aims to identify such services and convert them to Medicaid-covered programs. Doing so will increase revenue by bringing in federal matching funds. This would enable the state to either decrease the amount that it is spending on Medicaid or expand coverage or increase the services it provides without spending more money. For example, a state may provide targeted case management services through community clinics and county schools, funded by general funds allocated to the health department. Since this service can be covered under Medicaid, a state can change its Medicaid plan to allow case managers (or the local clinics) to bill Medicaid for these services for those patients who qualify for Medicaid. In return, the state receives a 50 percent or higher federal match. Now, the state can spend half as much for the same service for eligible people or spend the same amount and increase the amount of the service (number of case managers, for example).

Services that states may already provide that could be billed to Medicaid include supportive services for foster care children, case-management, maternal and child health clinic services, home visitation, family planning clinics, services for developmentally disabled children, school-based health services, mental health services, and substance abuse services.

Pros and Cons

Pros

• The amount of federal revenue brought into the state can be increased (by millions of dollars, in many cases), thus allowing a state to avoid reducing eligibility or services or to fund new or expanded services for its underserved population without spending additional money.
• Medicaid billing-and the standard definition of service that would come with it-may facilitate coordination with more traditional medical providers about a patient's care by, for example, creating records that can be more easily shared.

Cons

• Implementation requires extensive paper work and a commitment of resources by state agencies to identify such programs, create new billing codes, develop working relationships with "new" providers and cover other start-up costs.
• Medicaid maximization may appear to increase the Medicaid budget and scope of services when it has not done so in fact, resulting in a perception of program growth.
• Medicaid maximization may create new constituencies that may demand increased funding in the future. Thus, it may be difficult not only to alter programs once they have been implemented or expanded but also to control spending.
• Maximizing Medicaid "medicalizes" certain services by standardizing service providers or requiring recipients to meet specific medical qualifications.
• For some services or populations, the Medicaid framework may be perceived as detrimental if it places limits on service provision (for example, limits on home-delivered meals when a state-only elderly program is converted to a 1915 (c) waiver).

State Experience

Most states already have used Medicaid maximization to fund school health services. For example, school services for disabled students are funded in conjunction with state departments of education, under the federal Individuals Disabilities Education Act (IDEA). Services to other Medicaid-eligible children are funded in conjunction with the federal early and periodic screening, diagnosis and treatment (EPSDT) initiative or as part of an Individual Education Program (IEP), the individualized education plan for special education children.

Many other state-provided services potentially may be eligible for a federal Medicaid match. In 1991, for example, the Missouri Department of Mental Health (DMH) developed a cooperative agreement with the state's department of social services to bill Medicaid for substance abuse treatment. Under the new agreement, the state Medicaid agency pays 40 percent of the cost of treatment services for those eligible, while the federal match pays the remaining 60 percent. The DMH uses the money previously spent on treatment (the 60 percent now covered by the match) to expand the program, paying for residential care and child care-services not covered by Medicaid. According to the state's substance abuse treatment coordinator, Missouri would never have been able to afford to provide these extra services if the treatment program had not been converted to Medicaid.

Design and Policy Issues

• Why use this strategy? Is it to generate funds to maintain current access and reduce state funding, increase access and maintain current funding, or increase access and increase state funding? The answer to this question will help policymakers decide which programs might best be brought into Medicaid and how to explain the benefits of bringing additional programs under Medicaid.
• Can the state benefit from this strategy? Are there Medicaid eligible programs in the state that are either funded wholly by the state or receive only partial Medicaid reimbursement? What new programs could the state add? State health and human services departments should be able to identify some, if not all, eligible programs.
• What will it take to change the way in which programs in the state are financed? How is Medicaid policy changed? These changes often will appear as part of Medicaid budgets, so policymakers may want to talk with fiscal analysts in the state Medicaid agency. In some states, executive agencies may play the major role. In others, the legislature may be involved. Since more than one state agency may have to be involved in working out services standards and budgets, the legislature may have to bring together two or more agencies that traditionally have not been linked.

Federal and State Involvement/Constraints

Some of these changes might require an amendment to the state's Medicaid plan or a "waiver" that would need to be approved by the federal government.

Read More About It

The Lewin Group and Fox Health Policy Consultants. Study and Plan for Maximizing Federal Medicaid Funds for Hawaii, prepared for the Governor and the Legislature of Hawaii, 1990.

The Lewin Group and Sjoberg Evashenk Consulting LLC. Idaho's Medicaid Program: The Department of Health and Welfare Has Many Opportunities for Cost Savings, prepared for the Idaho state Legislature, November 2000.

Notes

1 Smith, Vernon; Eileen Ellis; and Mary Hogan, Health Management Associates Inc. Effect of Medicaid Maximization and Managed Care on Cooperation, Collaboration, and Communication within State Governments. Center for Health Care Strategies. Princeton, N.J. July 1999. http://www.chcs.org/publications/pdf/ips/IPSEffectMedicaidMaximization.pdf

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