Expansion of Public Programs for Low-income Individuals
Without passage this year of health insurance reform containing an expansion for low-income families, states will spend more on their programs for the poor than they currently pay out. A recent Robert Wood Johnson Foundation report shows that within a decade the number of people without health insurance could increase by more than 30 percent in more than half of the states and in every state, the number of uninsured would increase by at least 10 percent.
Currently, only certain groups of low-income people are eligible for publicly provided health insurance—Medicaid—referred to below as “traditional eligibles.” Left out are approximately 60 million uninsured low-income adults between 18 and 65 who do not qualify for Medicaid, no matter how needy they may be, since that program has always targeted children, their parents (or other adult caretakers), the disabled and those over 65. In fact, low-income adults below 200% of poverty account for just over half of the non-elderly uninsured. They do not have access to the care that can prevent a treatable problem from becoming an illness requiring hospitalization (and often becoming prematurely disabled or dying) and resulting in expensive bills (where the costs are often shifted onto other payers).
The expansion of the Medicaid program can ably fill this enormous gap in coverage, and, in fact, is included as a provision in the three main bills aiming to reform the health insurance system. House Resolution 3200 America’s Affordable Health Choices Act (H.R. 3200), the Senate HELP Committee Affordable Health Choices Act (Senate HELP), and the Chairman Max Baucus’ Senate Finance Committee’s Mark (Chairman’s Mark) all seek to expand coverage to low-income adults. Click here to see a table format displaying the specific provisions in two of the bills addressing the expansion of public coverage or read further.
As you will see in the following descriptions of the competing proposals, the House version is more helpful on most issues. The Shriver Center supports the most helpful provision in each case—we favor more comprehensive, more affordable and higher quality coverage.
Expanding Access to Medicaid
H.R. 3200 and the Senate HELP Bill would expand Medicaid to all individuals up to 133% of the federal poverty line (FPL) and 150% FPL, respectively. The Chairman’s Mark concedes to states to make the final decision. States would have the option to expand Medicaid coverage to childless adults with 133% FPL as the minimum eligibility.
Cost Sharing Between the Federal Government and the States for Expanded Medicaid
Medicaid financing is currently shared across state or local governments and federal government following the formula set forth in the federal matching percentage for each state (officially known as the Federal Medical Assistance Percentage, or FMAP). On average, the federal government pays for 57% of Medicaid costs, but this varies from a floor of 50% to a high of 76% in 2010. However, states are receiving an enhanced FMAP as a result of the American Recovery and Reinvestment Act (ARRA) to help support Medicaid during the economic downturn, when demand for Medicaid increases and states can least afford to support their programs.
State governors are worried about the cost of Medicaid expansion and the reform proposals address these concerns. H.R. 3200 proposes full federal funding (100% FMAP) for new traditional eligibles between states’ eligibility levels as of June 16, 2009 and 133% FPL and traditional eligibles currently covered by waivers. Under the Chairman’s Mark, states would receive assistance in financing the cost of the Medicaid expansion through a percentage point increase in the FMAP. The percentage point increase in the FMAP for each state would depend on the “neediness” of that state (i.e. low Medicaid enrollment proportional to unemployment rates). By 2019 all states will receive a FMAP increase of 32.3% for the newly eligible (e.g., Illinois’ FMAP would be 82.3%).
Increase in Provider Rates
Currently, provider payment rates vary across states since state Medicaid programs have broad flexibility to set rates. On average, hospital fees are estimated to be 5% below Medicare rates, physician fees 40% below, and managed care rates about 15% below Medicare rates. Average Medicaid fees across the United States for primary care physicians are at 66% of Medicare fees.
H.R. 3200 phases in increases in payments for primary care services in fee-for-service and managed care to Medicare payment rates (80% of Medicare in 2010, 90% in 2011, and 100% in 2012 and after). The cost of the rate increases would be 100% federally financed over a 2009 base. An Energy and Commerce Committee amendment requires states to specify and get approval for the payment rates to be paid under the state’s Medicaid program. The amendment also requires an annual report on Medicaid payment rates and methodologies and an explanation of the process used to allow providers and the public opportunity to review and comments on rates.
The Chairman’s Mark does not specifically address provider rates but would establish a bundled payment demonstration project for up to 8 states for acute and post-acute care. The proposal also would establish a “Global Payments” demonstration project (providers are paid standardized per-patient annual fees designed to cover care for the entire year) for up to 5 states from 2010 to 2012 for large safety-net hospital systems. The Mark further sets forth the establishment of a CMS Innovation Center designed to test, evaluate, and expand in Medicare, Medicaid, and CHIP (Children’s Health Insurance Program) different payment structures and methodologies to foster patient-centered care, improve quality, and slow Medicare costs growth. Finally, the proposal would establish demonstration projects in Medicaid and CHIP to allow pediatric medical providers organized as accountable care organizations to share in cost savings.
Changes to Medicaid’s Benefits
In H.R. 3200, those eligible for Medicaid would continue to receive the traditional Medicaid benefits package (all “medically necessary” services). Under The Chairman’s Mark, all newly-eligible adults would receive a benefit package that meets minimum quality coverage requirements as determined by the new law. These packages are not likely to be as comprehensive as Medicaid.
In the Chairman’s Mark, all newly-eligible adults would receive benefits that meet the minimum requirements (including prescription drugs) as established by the Deficit Reduction Act. The Proposal would require states to offer premium assistance and wrap-around benefits to Medicaid beneficiaries who are offered Employer-Sponsored Insurance if it cost-effective to do so in 2013.
Choice of Medicaid or the Exchange
Some of the health insurance reform proposals would create a Health Insurance Exchange (the Exchange), which has been described as “a new entity intended to create a more organized and competitive market for health insurance by offering a choice of plans, establishing common rules regarding the offering and pricing of insurance, and providing information to help consumers better understand the options available to them.” One goal of an Exchange is to offer enrollees a choice of health insurance plans, and some proposals, including H.R. 3200, include a public plan option to foster competition among plans on the price of coverage and minimize the tendency for the plans to vary benefits in order to attract healthier than average enrollees.
Each of the proposals addresses the overlap of Medicaid and the Exchange a little differently. The Senate HELP proposal stipulates that people eligible for Medicaid would receive health insurance through the state and would, thus, be ineligible for the Exchange. H.R. 3200 would allow newly eligible individuals, the childless adults, to choose coverage through the Exchange, if they were enrolled in health coverage that qualifies under the new quality provisions during the six months before becoming Medicaid eligible.
Specifically, in H.R. 3200, non-traditional (childless adults) Medicaid eligibles may enroll in coverage through the Exchange if they were enrolled in qualified health coverage during the 6 months before becoming Medicaid eligible. States must enter into a “Memorandum of Understanding” with the Exchange to coordinate enrollment of individuals in Exchange-participating health plans and under the state’s Medicaid program. There is a “Medicaid screen and enroll obligation” requiring states to auto-enroll non-traditional Medicaid-eligible individuals in Medicaid if they apply for coverage in the Exchange and are found to be Medicaid eligible. For traditional eligibles, states can opt to use the same auto-enrollment process or use presumptive eligibility and follow Medicaid enrollment procedures. States may be authorized to determine eligibility for affordability credits through the Exchange.
Under the Chairman’s Mark, once the Exchange is fully operational, individuals below 100% FPL would be ineligible for the tax credit. However, beginning in 2014, individuals between 100-133% FPL could choose between Medicaid and tax credits for the Exchange. Senator Baucus recently updated the Chairman’s Mark to accept an amendment by Rep. Rockefeller (D, WV) that allows individuals above 133% FPL who receive only wrap-around Medicaid benefits to be eligible for tax credits through the state Exchange. The Chairman’s Mark also would require states to establish a Medicaid enrollment website to promote seamless enrollment between Medicaid and tax credits through a state exchange. These state Exchanges may contract with state Medicaid agencies to determine eligibility for Medicaid, CHIP, and tax credits for state residents if the contract lowers overall administrative costs and reduces the likelihood of eligibility errors and disruptions in coverage. Lastly, states would not have to maintain current eligibility levels for Medicaid coverage of non-pregnant, non-disabled adults with incomes above 133% FPL until Exchanges are fully operating or Jan. 1, 2014. States could cut back this eligibility as of Jan.1, 2010, if they are facing budget deficits or expect to face deficits in the coming year.
Maintenance of Effort (MOE) by the States
While states generally have flexibility to change optional eligibility levels for their state Medicaid programs, ARRA’s provision of additional funding for states in the form of an enhanced FMAP requires states to maintain eligibility levels and enrollment procedures from July 1, 2008 to be eligible for enhanced funds.
Under H.R. 3200, Medicaid eligibility standards, methodologies, or procedures (including waivers) may not be more restrictive that what was in place as of June 16, 2009. However, an Energy and Commerce Committee amendment provides an exception to the MOE for certain waivers that permit individuals to receive a premium or cost-sharing subsidy for individual or group health insurance coverage.
The Chairman’s Mark would require states to maintain existing Medicaid income eligibility levels for all Medicaid populations. The MOE for coverage above 133% FPL would expire when the state exchange becomes fully operational (expected to be 2013).
