Medicaid programs may act now on childless adults

As of 2014, Medicaid will cover everyone below 133% of the federal poverty level, including childless adults and others who are currently ineligible. However, the new health care reform law gives states the option of covering additional low-income adults right away.

Previously, states had to seek a Medicaid waiver to provide this coverage and were required to show that expanding coverage would not increase federal expenditures in the state.

However, states that already cover childless adults through a state-funded program are the ones most likely to consider this new option, according to January Angeles, a policy analyst at the Center on Budget and Policy Priorities in Washington, DC. These include Washington, Connecticut, Minnesota, and Pennsylvania.

"If they take the option to move those childless adults into Medicaid, then they would get a federal match for that, whereas if they keep their current program, it's all being paid for through state funds," says Ms. Angeles. "So, that is the attraction there."

Since states that don't cover any childless adults now will get the enhanced FMAP for all their childless adults, they would clearly get a larger population of their Medicaid expansion covered through federal dollars. States that want to start covering childless adults before 2014 don't necessarily need to expand all the way up to 133% of the FPL, however.

"You can phase in the expansion and set lower income thresholds, such as 50% or 75% of the poverty line. But within that income range, you can't cap enrollment," says Ms. Angeles. "So, if states expand to 100% of the poverty line, that means anybody with an income up to that level who applies and qualifies would have to be covered."

Some state-only programs currently have enrollment caps. If they reach a certain enrollment number, they start to form a waiting list. A state-only program may cover up to 200% of the FPL with a cap of 20,000 for enrollment, for instance.

"There is no way to say for sure that the amount of money you have appropriated for this program is what you are going to spend in Medicaid if you choose the early expansion. In Medicaid, you can't stop enrollment when you hit a certain level of spending," says Ms. Angeles.

For this reason, states may choose to slowly phase in the expansion, such as starting at 25% or 50% of the poverty line. This would reduce the likelihood of states "not being able to contribute the state match to keep the early Medicaid expansion running," says Ms. Angeles.

Other considerations

According to a guidance from the Centers for Medicare & Medicaid Services on coverage for the newly eligible population, states are required to provide these individuals with a benchmark benefits package. This doesn't necessarily mean a traditional Medicaid benefits package.

"There is a lot of flexibility to define what that benefit package would be," says Ms. Angeles. "So, the level of benefits to provide is another consideration for states that do expand, because they are not required to provide the full Medicaid package."

In light of the new subsidies and the Medicaid expansion that will both come on board in 2014, there will be a need to coordinate these two systems. "That is an issue that all states will have to grapple with," says Ms. Angeles. "Another consideration is a change in the income definition for Medicaid to align with the subsidies."

States will also need to think about how to change, modify, or improve their eligibility system in order to anticipate both the Medicaid expansion and the subsidies that are going to be available by 2014. For example, there is a requirement in the health care reform legislation for a single application and a streamlined process.

"Changes will have to be made to the current Medicaid eligibility process. States will have to start thinking about implementing that ahead of the coverage expansion," says Ms. Angeles. "Some eligibility systems are really archaic and difficult to change. A slight change can require [a] significant amount of time or resources to implement."

If states have already simplified some of those rules and procedures, though, they won't have to do as much to get ready for health reform. For example, health reform would eliminate asset tests for Medicaid. "Some states have already done that for all their kids and parents, so that is one less thing that they will have to do," says Ms. Angeles.

Preparing for changes

Maine's Medicaid program now covers childless adults to 100% of the FPL through a capped waiver. "The cap is a fiscal cap. Currently, we have about 12,000 people covered," says Trish Riley, director of the governor's office of health policy and finance.

Ms. Riley adds that Maine's Medicaid program is "well positioned for reform." With federal financial support at 100% for start up, then at 90% later, we think the plan is affordable for Maine," says Ms. Riley. "There are potential savings to the state," explains Ms. Riley. "If we retain children in CHIP, we receive a 23-point increase in federal match. We now cover about 15,000 children in CHIP but have not calculated savings yet." The state also will see reduced Medicaid costs that now pay for parents to 200% FPL, when those parents convert to subsidized coverage.

In Iowa, childless adults are covered by IowaCare, a waiver program that was created five years ago in the wake of the intergovernmental transfer business. Coverage is limited and, because of the funding mechanism, people must receive care only at University of Iowa Hospitals in Iowa City or, if they live in Polk County, at the public hospital in Des Moines.

Current enrollment is about 400,000. "We expect that in three years, when health care reform kicks in, there will be demand from an additional 80,000 to 100,000 people, mostly singles and childless adults," says Jennifer Vermeer, Iowa's Medicaid director. "The challenge here is similar to the challenge elsewhere — how to build up the provider network, how to revamp the eligibility system, and how to pay for the state's share."

Contact Ms. Angeles at (202) 408-1080 or angeles@cbpp.org, Ms. Riley at (207) 624-7442 or Trish.Riley@maine.gov, and Ms. Vermeer at (515) 725-1123 or jvermee@dhs.state.ia.us.