Blueprint Proposals for Medicaid

Rachel B. Morgan RN, BSN 2/13/2017

Federal Health LogoCongressional staff speaking with NCSL’s Health and Human Services Standing Committee officers in December 2016 suggested that certain blueprint policy documents could be used as models for policies that would be considered in the 115th Congress during the first legislative session. This included several proposals from previous Congresses.

Medicaid Blueprint Proposals

Proposals affecting the Medicaid program have generally taken one of two forms, an overall limit on federal Medicaid spending—often referred to as a block grant—or implementing a limit on average federal Medicaid spending per enrollee—known as a per capita cap. A per capita cap would not necessarily limit federal spending for any specific enrollee, but could instead limit the total federal funding to an amount equal to the dollar amount of the per capita cap multiplied by the number of enrollees covered by that cap.

According to the Government Accountability Office (GAO), the key difference between the block grant and the per-capita-cap is that federal funding provided through a block grant would generally not change in response to program enrollment, whereas federal funding provided through a per-capita-cap would increase or decrease in accordance with changes in Medicaid enrollment levels. As with establishing a block grant for Medicaid, a Medicaid per capita cap would require legislative action to be established and could be designed and implemented in different ways, depending, in part, on Medicaid program and funding objectives.

Milliman White PaperBuilding blocks: Block grants, per capita caps and Medicaid reform (Jan. 31, 2017)

GAO ReportMedicaid: Key Policy and Data Considerations for Designing a Per Capita Cap on Federal Funding (Aug. 2016)

Select Proposals in the 114th Congress

A Better Way

On Nov. 15, 2016, House Republicans released new material outlining their plan to replace the Affordable Care Act (ACA), entitled “A Better Way”, that was originally unveiled in June.

The proposal is built on five principles:

  • Repeal of the ACA.
  • Provide all Americans with more choices, lower costs, and greater flexibility.
  • Protect our nation’s most vulnerable.
  • Spur innovation in health care.
  • Protect and preserve Medicare.

This plan would provide states a choice of either a per-capita allotment or a block grant for their Medicaid financing mechanism. Depending on their unique set of circumstances, states could choose the block grant option or otherwise default into a per-capita allotment approach. House Republicans feel a per-capita allotment would achieve three inter-related aims:

  • Reforming Medicaid’s financing.
  • Restoring Medicaid’s focus on the most vulnerable.
  • Restoring federalism by empowering states with new flexibilities to run their Medicaid programs.

How would the allotment be calculated?: The federal allotment would be the product of the state’s per-capita allotment for the four major beneficiary categories—aged, blind and disabled, children and adults—and the number of enrollees in each of those four categories. The per-capita allotment for each category would be determined by each state’s average medical assistance and nonbenefit expenditures per full year equivalent enrollee during the base year (2016), adjusted by inflation.

Exclusions: Certain payment categories would be excluded from the allotment and would be calculated through a separate funding stream, such as federal payments to states for disproportionate share hospitals (DSH), Graduate Medical Education (GME) payments, and other appropriate exclusions.

The per-capita allotments made to states would be for all enrollees in the program, and the amounts states would receive for each enrollee would be capped according to the appropriate category, regardless of the state expenditures.

Transition Period: The plan offers a transition period before the per-capita allotments are applied in 2019.

Medicaid Expansion States

  • For states that have not expanded Medicaid under the ACA as of Jan. 1, 2016, under the per-capita allotment approach they would not be able to do so. States that have expanded Medicaid would be given new authorities to better manage the health care and control costs of the expansion population.
  • In 2019, expansion states would receive the same amount of money as they currently receive. Those states, however, would be given the flexibility to shift dollars from less needy populations to those who need it the most.
  • The enhanced federal medical assistance percentage (FMAP) for the expanded adult population in Medicaid would be slowly phased down each year until it reached a state’s normal FMAP level.
  • States would also be allowed to reduce income eligibility thresholds below the current 138 percent of the federal poverty level (FPL) threshold, or phase out expansion by freezing enrollment but continuing to cover current enrollees.

The Children’s Health Insurance Program (CHIP): The CHIP program would continue at the same rate of support. The ACA had increased the matching rate for CHIP by 23 percentage points—not permitting any state to receive more than 100 percent—starting in fiscal year FY 2016 and going through FY 2019. The House Republican’s plan keeps the CHIP financing arrangement at the current levels.

State Options to Adopt Work Requirements in Medicaid: —The proposal would allow states to adopt a requirement that able-bodied adults be seeking a job, employed or participating in an education, training or approved community program.

Additional State Flexibilities

  • Allows states to use Medicaid dollars to provide premium assistance or a limited benefit to work-capable adults who are working or preparing for work.
  • States would be allowed to set reasonable enforceable premiums for most non-disabled adults.
  • States would also be allowed to require non-disabled adults to use premium assistance if it was cost effective without all of the existing requirements for the provision of wrap around services.
  • In addition, states could use Medicaid dollars to help offset cost-sharing in an employer plan for an eligible adult and could implement programs to incentivize wellness and healthy behavior.
  • States would also be allowed to use waiting lists and enrollment caps for non-mandatory populations.

For patients with pre-existing conditions, ACA’s solution was to enroll individuals in the Medicaid program. Instead this proposal contends that by giving states better tools, resources, and flexibility, states will find the solutions that fit the needs. 

The proposed plan makes certain recommendations concerning health coverage:

Addressing Competition in Insurance Markets–Additional information about the House Republicans’ plan is provided in the following documents:

Select Proposals in the 113th Congress

Making Medicaid Work

In 2013, leaders of the House Committee on Energy and Commerce and the Senate Finance Committee, Chairman Fred Upton (R-Mich.) and Senator Orrin Hatch (R-Utah) respectively, partnered to create a blueprint for the Medicaid program seeking to modernize the Medicaid program in two primary ways:

  • Equipping states to implement patient-centered reforms.
  • Imposing fiscal discipline in the program.

This joint congressional committee blueprint, Making Medicaid Work, is based on analysis of the feedback from the states, input from providers and patients, and the facts about the country’s fiscal condition. This blueprint proposes putting the Medicaid program on a sustainable budget with per-capita-caps and establishing a transparent funding stream for states.

Equipping States to Implement Patient-Centered Reforms

Goal 1: Improving Quality of Care Offered to Benefit Recipients Through the Following Models.

  • Encourage individual benefit design by offering states a menu of options from which to design benefits through: (1) Additional benchmark benefit design options; (2) Value-based insurance design; (2) Assistance to enroll in private coverage; (3) Safety plans; (4) Basic primary care benefits; (5) Enhanced coordination for mental conditions; (6) Healthy behavior framework with enhanced benefit accounts, appropriate cost-sharing, and shared responsibility; and, (7) Consumer-driven options.
  • Reform the delivery system through increased provider transparency and value-based purchasing through: (1) Promoting health transparency; (2) Aligning provider incentives; and, (3) Providing states the ability to set provider rate.
  • Improving access to coordinated care by: (1) Offering managed care to more beneficiaries; (2) Aligning payer incentives; (3) Improving managed care payment determinations; and, (4) Preserving state regulatory authority.
  • Reducing administrative barriers that deter innovation by: (1) Setting the Centers for Medicare and Medicaid Services (CMS) a timeline with an 1115 waiver clock; (2) Requiring HHS to afford waiver reciprocity if a similar waiver has been approved for the state; and, (3) Creating an innovative practice compendium by promoting information sharing among states on pending waiver applications, existing demonstrations, and analysis of any long-standing waivers.
  • Increasing the efficiency and effectiveness of eligibility determinations and review through: (1) Repeal of the maintenance of effort (MOE) mandate; and, (2) Encouraging proper recipient identification.
  • Building upon existing efforts to coordinate care of dual-eligible enrollees.
  • Promoting transparent funding allotments for long-term care services and support.
  • Protecting benefits for disabled populations currently eligible for Medicaid.

Goal 2: Define Transparent Funding Streams to States to Meet the Individual Health Care Needs of Discrete Medicaid Populations.

  • Per-Capita-Cap Reforms: The overall federal per capita allotment would be based on the product of the state’s number of enrollees in each of the four population category and the per capita amount for each population category.
    • State Based Year Per-Capita Calculations.
    • Based on the most recently available expenditure data and would be state.
    • Caps would grow by a realistic exogenous and appropriate growth factor for each state.
    • The secretary would, every five years, rebase state-specific per capita payments if average per capita costs have grown annually at a rate slower than the targeted growth rate specific.
    • Geographic Spending Variation: The goal is to consider any recommendations that appropriately adjust payments to attempt to normalize spending across states over time.
    • Continued State Investment and Data Integrity: On an annual basis, CMS would administer post facto adjustments for overpayments or underpayments to appropriately reflect enrollment levels, and states would be subject to audits and penalties for over-reporting actual enrollment data.
    • Risk Corridors for Disabled Per-Capita Amounts: A shared-savings and risk corridor model would be established to allow states incentive to achieve efficiencies and maintain savings from the model as well as determine how to protect vulnerable populations such as the disabled from unpredictable spending above the state’s cap.
    • Excluded Per-Capita Payments: Certain payment categories would be excluded from the caps and would be calculated through a separate funding stream, including: (1) federal payments made to states on behalf of certain dual-eligibles whose Medicaid expenses are limited to cost-sharing and premiums; (2) federal payments made to disproportionate share hospitals; (3) Graduate Medical Education payments; (4) federal payments made under the Children’s Health Insurance Program (CHIP); (5) federal payments made on behalf of Indian Health Service (IHS) enrollees; (6) other partial Medicaid benefit enrollees; and, (7) other appropriate exclusions.
    • Special Provisions for 1115 Waivers: Would establish special provisions for states operating Medicaid programs under waivers in a manner consistent with improved budget neutrality requirements as discussed previously.
    • Targeted State-Determined Spending Levels: States would be allowed to cap enrollment for high income recipients if state Medicaid spending exceeded state-determined budget targets.
  • Rewarding Quality Improvement and Cost Effectiveness Success- While the increased flexibility is critical for states, we should ensure there is a framework in place that holds states accountable and improves the quality of care for enrollees. As such, states would be required to report on transparent achievement measures on access to care, patient outcomes, patient experience, and health care costs.
  • Program Integrity Enhancements
    • Lower Provider Tax Threshold- While it would not eliminate state provider taxes altogether, this proposal would adjust the provider tax threshold back to its previous 5.5 percent level.
  • Increase Transparency for Medicaid Supplemental Payments- This proposal would strengthen reporting requirements for DSH payment audits. Additionally, this proposal would impose reporting requirements on non-DSH supplemental payments, clarify payment policies for non-DSH supplemental funding, and require annual independent audits of states’ non-DSH provider payments.