IOWA MEDICAID REFORM
The Iowa legislature approved a Medicaid reform package in May 2005 that dramatically reworks the state’s relationship with the federal government over Medicaid funding while providing significant new money to cover medical services for thousands of additional uninsured Iowans.
The backdrop to the new program is Iowa’s use of intergovernmental transfer (IGT) funds as part of the state share of Medicaid funding. While the use of IGTs (transfers of public funds between state governmental bodies such as a county to a state) are legal, the federal government considers some forms of IGTs (including Iowa’s) to be “nonconforming.” Negotiations between Iowa and the federal government over this issue resulted in the passage of the Iowacare Medicaid Reform Act (House File 841), a bill that while resolving the IGT controversy also promises to expand the number of uninsured persons eligible for Medicaid coverage The legislation also allows for Medicaid coverage of persons in mental institutions, previously excluded in Medicaid law.
House File 841, passed in May 2005, eliminates IGTs as revenue to the Hospital Trust Fund, which provided funds to two major Iowa hospitals and four mental health institutions for uncompensated care. (Iowa state and county funds provide coverage to about 30,000 indigent and uninsured Iowans at these hospitals and mental health institutions) Instead, Medicaid federal and state matching funds (federal rate of about 636 percent) and other federal funds will fund the expansion of uninsured coverage at those institutions.
The state estimates that the IGTs would have provided about $66.1 million in state revenue to the Medicaid program in FY 2006, resulting in a shortfall of that amount with the elimination of the IGT program. (The $66.1 million drew down about $115 million in federal matching funds.) By shifting state costs to the federally matched Medicaid program, Iowa plans to expand Medicaid coverage to persons between the ages of 19 and 64 with incomes at or below 200 percent of the federal poverty level (although not every person in that category will have an entitlement to such services). The state estimates that about 100,000 insured people could receive the expansion services over the next five years.
Other major provisions of House File 841 allow the state to:
- limit benefits under the Iowacare program to inpatient, outpatient, and physician services,
- limit enrollment, eligibility, services, and the provider network, and
- Requires enrollees to pay a monthly premium on a sliding-fee scale, not to exceed 5 percent of annual income.
House File 841 also allows the state to adopt higher level-of-care criteria for admission to nursing homes than for home and community-based services (HCBS), with the intent to encourage greater access to HCBS. (Federal Medicaid policy requires that applicants for HCBS demonstrate that the severity of their condition puts them at risk for nursing home care.) Decoupling the criteria for nursing home care and HCBS should make it easier for Iowans to access HCBS.
While seeking to expand the use of HCBS, the legislation still allows Iowans who may not have ready access to home care services (such in rural areas) to get into a nursing home even if they do not meet the new higher nursing home level-of-care criteria. In these circumstances, they will need only to meet HCBS eligibility criteria, which call for a need for hands-on assistance with one to three daily activities (such as dressing and bathing) or, in the case of mentally ill or chronically confused individuals, the need for a “safe and secure environment.”
The U S. Centers for Medicare and Medicaid Services approved the state’s 1115 Medicaid demonstration waiver applications in June 2005, allowing the program to begin on July 1, 2005.
 1115 Waivers Page
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