CMS proposed Medicaid/Medi-Cal changes giving states unprecedented flexibility … to offload costs onto patients in poverty

National Partnership of Women and Families, Feb 26, 2008

CMS Proposes Medicaid Changes That Would Give States ‘Unprecedented Flexibility’

On Thursday, the federal Centers for Medicare and Medicaid Services released controversial proposed rule changes that the agency said would grant states “unprecedented flexibility” in designing Medicaid programs and would require increased cost sharing for beneficiaries, CQ HealthBeat reports (Carey, CQ HealthBeat, 2/21). Governors were quick to criticize the proposed changes, claiming they would shift billions of dollars in costs to the states, which could lead to cutbacks in services, the New York Times reports. The new rules would reduce federal payments for public hospitals, teaching hospitals and services for the disabled, among others, according to the Times (Pear, New York Times, 2/24).

According to CMS, the rule changes are in line with the Bush administration’s “goals of aligning Medicaid more closely with private market insurance and giving states more control over their Medicaid benefits packages.” HHS Secretary Mike Leavitt said, “The proposed rules will result in patients having more choices and greater control over their health care decisions.”

The rule changes would allow states to offer alternative benefit packages called “benchmark” plans, which would provide Medicaid beneficiaries with health coverage that has the same value as plans offered to other individuals in the same state. Benchmark plans would be required to have the same value as plans being offered to other individuals in the same state. Benchmarks in the proposed rule include the standard Blue Cross/Blue Shield preferred provider option offered to federal government employees, state employee coverage, coverage offered by the largest commercial health maintenance organization in the state or coverage approved by the HHS secretary. States would have the choice of offering additional benefits such as dental coverage. States also would be able to contribute to a beneficiary’s employer-sponsored health plan premiums so that the individual could remain insured through the private sector.

The proposed rule changes also would allow states to revise existing premium and cost-sharing plans to make them more similar to those allowed under SCHIP, according to CQ HealthBeat. The rule change would not affect beneficiaries with incomes below 100% of the federal poverty level, but cost sharing could increase for beneficiaries with incomes between 100% and 150% of the poverty level, and beneficiaries with incomes greater than 150% of the poverty level could be required to contribute copayments. Under the proposed change, all cost sharing would be limited to no more than 5% of a family’s income.

The proposed changes, which would implement provisions of a 2006 budget reconciliation bill (PL 109-171) and a 2006 package to extend tax provisions (PL 109-432), have a 30-day public comment period (CQ HealthBeat, 2/21).

Governors’ Reaction

Governors of both parties on Saturday at the winter meeting of the National Governors Association strongly objected to the rule changes, arguing that they would shift billions of dollars in Medicaid costs to the states, the Times reports. The National Conference of State Legislatures also criticized the changes, describing them as “regulatory activism.” In addition, a group of 17 states told the Bush administration that the proposed changes would be “simply awful public policy.”

Governors said the Bush administration was unilaterally reshaping Medicaid in ways that would harm some of their most vulnerable citizens, according to the Times. “Governors strongly oppose the changes,” Vermont Gov. Jim Douglas (R), chair of the association’s HHS Committee, said, adding, “The timing could not be worse.” California Gov. Arnold Schwarzenegger (R) said the rule changes “would effectively end the federal government’s participation in many crucial components of the Medicaid program.”

Dennis Smith, director of the Center for Medicaid and State Operations at CMS, said the rules are needed to “protect the fiscal integrity of the Medicaid program” and maximize the use of federal funds. He added that since 2003, federal officials have persuaded 30 states to end “questionable Medicaid financing arrangements.” Although most of the obvious problems have been corrected, the Bush administration said many states still use federal Medicaid money for purposes unrelated to Medicaid, the Times reports. Douglas said that many states have “come to rely on Medicaid to help pay for special education and other services to children with disabilities.” He added that Medicaid is an important part of plans by many states to expand coverage for the uninsured (Pear, New York Times, 2/24).

The proposed changes on state flexibility, and premiums and cost sharing are available online.

Reprinted with kind permission from You can view the entire Daily Women’s Health Policy Report, search the archives, or sign up for email delivery here. The Daily Women’s Health Policy Report is a free service of the National Partnership for Women & Families, published by The Advisory Board Company.

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