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The National Governors Association (NGA) is trying to get the ear of former Gov. Tommy Thompson, now secretary of Health and Human Services (HHS), to push changes to Medicaid that the nation’s governors say will give them more flexibility in administering the program in their states. Some think tanks and advocates, however, say that while the changes might give the states flexibility, they also would deny beneficiaries basic protections they now enjoy and could increase the disparity in state programs.
Last January, just before the Clinton administration left office, HHS promulgated final regulations on Medicaid managed care that would have had the effect, as the NGA sees it, of "mandating redundant, excessive, and expensive layers of oversight on the interaction between state Medicaid agencies and Medicaid managed care plans." Those regulations were pulled back by the Bush administration and then were scheduled to take effect first on June 18 and then on Aug. 18. Now they are being held until Aug. 16, 2002.
The NGA says that with the delay, it is interested in working with the administration on necessary changes. In its policy document, it calls on the HHS Centers for Medicare and Medicaid Services (formerly HCFA) to "acknowledge the unique role of states as funders and administrators of the Medicaid program, rather than treating states as merely one of many stakeholders."
That means, the governors say, that states need more options in running their programs, and the agency has to be more timely and responsive in working with states.
The governors say that state Medicaid director letters and "regulations that undermine state flexibility" should be reviewed to see if they are necessary and serve a constructive purpose. They also caution against continually raising the bar higher for managed care programs than for fee-for-service programs, lest states risk the loss of commercial managed care entities willing to participate in the program.
One of the most significant recommendations calls for a restructuring of the "all-or-nothing" approach to Medicaid so governors will have more flexibility in designing benefit packages for optional populations. They recommend going to three categories of coverage:
1. Core vulnerable populations (mandatory). For all populations covered under federal minimum standards, states would guarantee eligibility and the federal minimum requirements with respect to benefits. There would be no cost-sharing responsibility on mandatory benefits, although states could impose reasonable cost sharing on a sliding scale basis for optional benefits.
2. Additional core populations (state option). Many states want to go beyond the minimum guarantee established in Category 1 to guarantee eligibility and benefits for additional populations. The NGA says that states should have the option to expand these guarantees to all individuals, regardless of category, up to a certain percentage of the poverty level. For everyone in this category, states must provide a benefit package that is actuarially equivalent to the Children’s Health Insurance Program (CHIP) statutory model. NGA calls for an "enhanced federal match," equivalent to the CHIP match, for all services provided to any individual in this category, anticipating that would give states an incentive to expand a guaranteed entitlement to a full benefit package. Cost sharing would be permitted consistent with the CHIP model.
3. Full flexibility expansions (state option). Either in addition to whatever expansions a state opted for in Category 2 or instead of a Category 2 expansion, states would be allowed to expand health insurance coverage to any population.
They would be allowed to expand coverage to all recipients up to a certain level of income, or target services to at-risk individuals, as defined by the state. States would have maximum flexibility in determining the level of benefits and amount of cost sharing provided to beneficiaries in this category. Because of the high degree of flexibility, states would only receive their regular federal match for all services provided.
An assessment of the implications of the NGA proposal performed by the Urban Institute’s John Holahan for the Kaiser Commission on Medicaid and the Uninsured in Washington, DC, indicates that the plan "would shift a substantial share of the cost of Medicaid to the federal government, primarily due to enhanced match. States could also expand coverage substantially because of the enhanced match and spend less than they do currently. The increased flexibility sought under the proposal is unlikely to result in substantial savings."
Mr. Holahan questions whether there is any justification for shifting so much spending to the federal government in the absence of any other changes in state policies, such as expanding coverage.
He says that one of the reasons that Medicaid spending grows faster than state tax revenues is the tendency of many states to rely on sales and property taxes, revenue sources that tend to grow more slowly than income. "Use of these revenue sources makes Medicaid a constant budget issue and contributes to chronic funding problems as well as efforts to shift spending to the federal government. Further complicating state decision making are expenditure caps in states like Colorado and Washington. While states are themselves to blame for their tax and expenditure constraints, it is health care for low-income populations that is affected."
A second implication seen in the analysis is that because state-matching requirements would be reduced by 30%, the cost of any expansion of coverage would be reduced. States could, Mr. Holahan says, substantially increase coverage with little or no new money. Under some scenarios, federal government costs could increase by nearly $40 billion.
At the same time, incentives facing states considering cutting back on benefits also would be reduced, and the possibility of cuts in coverage and benefits is a great concern to many observers about the NGA proposal, he adds.
He also raises questions about these issues:
Although these are serious concerns, the analysis concludes, the proposal has raised issues that merit full consideration. It raises legitimate issues about the appropriate roles of federal and state governments in financing health care for low-income families, the disabled, and the elderly. "An argument clearly can be made supporting a greater federal financial role. The proposal would also fundamentally alter the financial incentives facing states. The changes in matching rates that states seek could also usefully increase incentives for states to expand their programs to cover more of the uninsured as well as reduce the incentives to contract coverage, benefits, and provider payments when under financial stress.
"Thus, while it is hard to envision enactment of the NGA proposal as written, it may well contribute to the debate over how to both support and extend public insurance coverage for low-income populations," Mr. Holahan says.
The Kaiser Commission says the NGA approach turns to Medicaid as a vehicle to potentially expand coverage to the low-income uninsured population and give states greater flexibility and enhanced federal spending for their programs. The approach also increases the ability of fiscally pressed states to reduce the scope of the benefits they offer and increase the cost-sharing requirements they impose on low-income beneficiaries.
"Thus, the NGA proposal could result in significant changes to the current program structure, particularly with regard to services for the disabled and elderly. The proposal would eliminate many of the current protections under Medicaid and invite greater state variation in the coverage and scope of benefits available under Medicaid. While the NGA reform agenda also calls for enhanced federal matching dollars to provide incentives to maintain or improve coverage, it is unclear whether federal fiscal relief would be forthcoming, or in the way proposed by the NGA," the Kaiser Commission says.
Laurie Rubiner, vice president for program and public policy for the National Partnership for Women and Children in Washington, DC, tells State Health Watch that what the Bush administration sees as "cumbersome restrictions that prevent states from expanding coverage" the Partnership views as basic federal protections that should be preserved. There would be no additional money provided and no requirement that any savings that states can achieve be used for health insurance.
She raises a concern about the request to change cost-sharing provisions, nothing that Medicaid does not allow cost sharing to be more than beneficiaries can afford, but NGA would eliminate this restraint. While that change would only apply to optional categories, 66% of Medicaid spending is on optional categories or optional benefits.
Ms. Rubiner says the Partnership has been talking with members of Congress about the NGA proposal but recognizes they face an "uphill battle" to try to derail it.
[Contact NGA at (202) 624-5300, Mr. Holahan at (202) 833-7200, the Kaiser Commission at (202) 347-5270, and Ms. Rubiner at (202) 986-2600.]
A new Florida law that would limit Medicaid patients’ access to a number of costly prescription drugs has pharmaceutical producers angry. So irate, in fact, that the Pharmaceutical Research and Manufacturers of America (PRMA) has filed suit in a U.S. District Court in Tallahassee, FL, claiming that the new law violates federal Medicaid rules and asking for a preliminary injunction against the law until a full challenge can be made. The law in question, which establishes a formulary for Medicaid drugs in an attempt to save the state $214 million in Medicaid spending, requires that physicians seek prior state authorization before prescribing more than 1,000 drugs. PRMA’s attorneys say that Florida failed to appoint a committee to review and implement changes to Medicaid formularies as mandated by federal Medicaid rules.