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Implementing Health Reform: The Basic Health Program And Federal Medicaid Matching Rates



February 7th, 2013

Although we seem to be in a relatively quiet period between the issuance of a host of proposed 2014 reform regulations and their reappearance in final form, HHS continues to issue subregulatory guidance on a regular basis.  (The quiet may not last long — the final 2014 market reform rule is at the Office of Management and Budget and is expected to be published shortly.)  On February 6, 2013, HHS issued two guidance documents worthy of note.

The first is a “Notice to Establish a New System of Records” to support the Affordable Care Act’s health insurance exchange system.  The Privacy Act requires federal agencies that create a new record system to issue a notice that specifies the categories of persons covered by the system; the categories of records the system will contain; the legal authority for maintaining the system; the system’s purpose; the routine uses of the records, including specification of entities that may receive disclosures under routine use; and policies and practices for storing, retrieving, safeguarding, accessing, retaining, and disposing of records in the system.  The Notice covers these issues for records that will be created, used, and maintained by the health insurance exchange program.  It includes procedures that individuals can follow for identifying, accessing and contesting records about themselves. There is little new in the notice, but it provides a comprehensive overview of the information that exchanges will collect and who will have access to it.

A one-year delay for the Basic Health Program.  The second issuance,”Questions and Answers: Medicaid and the Affordable Care Act,” seems more immediately consequential.  The headline is that the ACA’s Basic Health Program will not become operational until 2015.  The Basic Health Program offers states the option of using federal premium tax subsidy dollars — which would otherwise be available to households with incomes between 139 and 200 percent of the federal poverty level — to reduce the cost of health insurance for this population and to ensure greater continuity of care for individuals who “churn” between Medicaid and premium tax credit coverage.   Although some states had indicated interest in the Basic Health Care Program, HHS has yet to issue regulations governing the program and getting the program up and running by January 1, 2014 is probably no longer possible.  In the FAQ, HHS promises to get rules out for comment in 2013 and final rules in 2014 for implementation beginning in 2015.

In the interim, HHS offers to work with the states to “identify similar flexibilities to design coverage systems for 2014.”  One idea discussed in an earlier FAQ,  is “bridge plans” — Medicaid managed care plans that would be offered through the exchange to low-income households on a limited enrollment basis if the plans met certain conditions.  Another approach discussed in the January 14 proposed Medicaid regulation  is the use of Medicaid funds to purchase exchange coverage, again subject to conditions, the most important of which one of which is that the coverage would have to be “comparable to the cost of providing direct coverage.”  HHS promises to review any proposals for flexibility put forth by a state.

Enhanced federal matches for state Medicaid spending.  The FAQ next addresses the questions of when state Medicaid expenditures will qualify for the increased federal medical assistance percentages (FMAP) available under the ACA.  The ACA provides for two different types of increased FMAP.  States that expand Medicaid to cover the new group of adults — aged 19 to 64 who have household incomes of up to 138 percent of the poverty level and who would not have been eligible for full Medicaid coverage, benchmark coverage, or benchmark-equivalent as of December 1, 2009 — will receive 100 percent FMAP for the expansion population for 2014, 2015, and 2016, phasing down to 90 percent for 2020 and beyond.  This newly-eligible group includes individuals who would have been eligible for coverage under a state waiver program but could not be enrolled because the waiver program had capped enrollment

States that had already expanded coverage through Medicaid or a state program to cover higher-income parents and non-pregnant childless adults prior to March 23, 2010, will receive “expansion state FMAP,” which will begin at a level of at least 75 percent for 2014, increasing to 93 percent for 2019 before settling at 90 percent for 2020.  A state will only be classified as an expansion state if it provided coverage as of March 23, 2010 that included hospital services; was not dependent on access to employer coverage or an employer contribution; and was not limited to premium assistance, hospital-only benefits, or a high-deductible or account-based plan.  Even if a state is classified as an expansion state, it can still receive the 100 percent newly eligible FMAP for populations that were offered less than full, benchmark, or benchmark-equivalent benefits, or if the expansion started after December 1, 2009.

Coverage offered by states prior to December 1, 2009 under an 1115 demonstration project must be actuarially analyzed to determine whether it constituted benchmark or benchmark-equivalent coverage.  A state will always receive the most favorable FMAP for any particular population.  Indeed, the general approach of the FAQ is to maximize FMAP for the states.

Pregnant women were covered by Medicaid up to 133 percent of poverty before the ACA and are thus not covered by the increased FMAP.  The question thus arises whether states must enroll pregnant women who apply for Medicaid as pregnant women, with the lower-level traditional FMAP, or whether they can enroll them as adults, subject to increased FMAP.  Further, must newly covered adults be tracked and moved back to the lower FMAP if they become pregnant, and may pregnant women be switched to the higher FMAP once they deliver?

States must enroll women who apply for Medicaid when pregnant as pregnant women, but have no obligation to track women enrolled as newly-eligible adults and switch them to the pregnant women category unless a woman requests the transfer.  Once a pregnant woman delivers, her eligibility should be reassessed and she can be transferred to the low-income adult group or be offered premium tax credit assistance as appropriate.

Some Medicaid beneficiaries currently qualify for Medicaid because of allowed income disregards but will not be eligible after eligibility is based purely on modified adjusted gross income (MAGI) without income disregards (other than the 5 percentage point uniform disregard).  These individuals retain Medicaid eligibility until March 31 2014 or the next scheduled renewal, whichever is later.  They must then be assessed for eligibility for other Medicaid eligibility groups or for premium tax credit assistance.

Finally, the FAQ reiterates that the ACA provisions that expand Medicaid to cover former foster children up to age 26 and all children age six or over with incomes up to 133 percent of poverty are not optional and were not affected by the Supreme Court decision.  CHIP enhanced matching rates will continue to be available for children in this group transferring from CHIP to Medicaid.

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