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Implementing Health Reform: Final Rule On Premium Tax Credit, Medicaid, And CHIP Eligibility Determinations (Part 2)



July 7th, 2013
by Timothy Jost

On July 5, 2013, the Department of Health and Human Services released a final rule to implement and coordinate certain Affordable Care Act’s provisions governing Medicaid and Children’s Health Insurance Program and the health insurance exchanges.  My first post addressed the exchange provisions of this regulation. This post discusses the Medicaid and CHIP provisions.

Medicaid appeals.  The final rule begins with provisions dealing with the delegation of authority to conduct Medicaid appeals.  The rule provides that state Medicaid agencies can delegate to the exchanges authority to hear appeals of denials of eligibility for individuals whose income eligibility is determined based on modified adjusted gross income (MAGI), as long as individuals are given the choice of having their hearing instead before the Medicaid state agency.

Appeal authority can only be delegated to exchanges that are government agencies that maintain personnel standards on a merit basis.  If the appeal entity is a federally facilitated exchange (FFE), it will only review final Medicaid eligibility determinations (and not initial assessments) that it made itself.

Medicaid agencies can delegate authority for conducting appeals of any Medicaid determination to another state agency, including a state exchange, under an Intergovernmental Cooperation Act waiver.  The Medicaid agency may establish a review process to ensure that the exchange has properly applied federal and state law.  Also, if an occasion arises where the exchange turns down an appeal of a denial of premium tax credits based on Medicaid eligibility but the state Medicaid agency upholds a state denial of Medicaid benefits, the Medicaid decision trumps the Exchange decision.

As under the exchange provisions discussed in the first post, the Medicaid rules allow individuals to opt to receive electronic rather than paper notices.  The Medicaid agency must mail a written confirmation that an individual has in fact elected to receive electronic notices.  If an email is returned undeliverable, the agency must send written notice within 3 business days.  Recognizing that all states are not ready to implement electronic notices, the rule allows states to delay providing notices electronically until January 1, 2015.

The Medicaid rule contains a provision on the retroactive reinstatement of applications by individuals who withdrew a Medicaid application to appeal a premium tax credit denial (see the post on the exchange provisions).  It also requires the Medicaid agency to notify the exchange of a final eligibility determination for an individual who is receiving premium tax credits pending a Medicaid eligibility decision.

Although the final rule does not finalize provisions regarding certified application assisters in the exchange, it does finalize provisions allowing Medicaid agencies to certify application assisters.  The rule requires application assisters to be trained in program eligibility and benefits rules, including rules governing premium tax credits and enrollment in a qualified health plan (QHP) through the exchange, and in rules governing safeguarding confidential information and avoiding conflicts of interest.  Federal funds are available for training application assisters, but not for their salaries.  The preface also opines that unless application assisters are otherwise subject to the civil rights laws, they can limit their services to a target group and are not required to comply with accessibility requirements.

The final rule contains provisions for the use of authorized representatives in the Medicaid program.  These are very similar to the provisions in the exchange regulations and will not be discussed separately.

Presumptive eligibility.  The rule contains a number of provisions on presumptive eligibility.  Current law permits states to allow “qualified entities” to make presumptive eligibility decisions for children.  The regulation allows states to extend presumptive eligibility to cover pregnant women, limiting such determinations to one per pregnancy.  The final rule also permits states that allow presumptive eligibility determinations for children and pregnant women to allow qualified entities to make presumptive eligibility determinations for individuals in other eligibility categories.

The ACA provision requiring states to allow hospitals to make presumptive eligibility determinations are also implemented by the rule.  This provision is vitally important for covering the uninsured, because it ensures that if any person eligible for Medicaid and unenrolled shows up at a hospital needing care, he or she can immediately be enrolled in Medicaid.  Hospitals must be allowed to make presumptive eligibility decisions for Medicaid categories where eligibility is income-based, and may be authorized to make eligibility determinations based on other grounds.

Hospitals must notify the state Medicaid agency that they plan to perform this function and that they will comply with state requirements.  States may disqualify hospitals that are not capable of making presumptive eligibility decisions or fail to comply with state standards.  States may not, however, recoup funds paid to a hospital pursuant to an erroneous presumptive eligibility determination.

The final rule requires state Medicaid agencies to start accepting streamlined applications and making eligibility determinations based on MAGI by October 1, 2013.  States must evaluate eligibility both currently under 2013 rules and prospectively using 2014 MAGI rules.  Starting on October 1, 2013, states may use 2013 rules for determining current eligibility, but may also use MAGI rules if they prefer.  Although several commenters expressed concern that the states were not yet ready for MAGI eligibility determinations, the preface notes that the states have known for some time this was coming and should be ready.  States may schedule applicants found eligible as of January 1, 2014 for a redetermination any time between 12 months from the application date and January 1, 2015.

CHIP.  The final regulation makes several changes in the CHIP program.  CHIP programs have been permitted to impose premiums and to “lock out” from eligibility children whose parents fail to pay premiums.  CHIP programs are also permitted to impose waiting periods prior to eligibility to discourage families from dropping employment coverage to enroll their children in CHIP.  The final rule prohibits waiting periods in excess of 90 days to align its requirements with the limit on waiting periods that the ACA imposes on commercial plans.  A waiting period is not permitted if the child loses Medicaid or premium tax credit coverage, or loses employer coverage due to the employer dropping coverage or a change or loss of employment; if employment-related insurance costs more than 5 percent of household income for the child or 9.5 percent for the family; if the child has special needs; or if the child loses coverage because of the death or divorce of a parent.  States may provide additional exemptions.

The final rule also limits CHIP premium lock-out periods to 90 days.  Once past-due premiums have been paid, the child must be reinstated.  Payment of past-due premiums cannot be made a condition of reinstatement after a lock-out period.  Past-due premiums remain due and owing, however, and states may attempt to collect them.  The state must provide the enrollee with an opportunity for an impartial review to address disenrollment and a 30-day grace period.

Medicaid premium assistance.  The rule clarifies that Medicaid programs may purchase coverage in the individual market through the use of premium assistance.  This has been possible in the statute for some time, but it was first widely noticed when Arkansas proposed using Medicaid funds in such a manner.

The premium assistance program recognized by the rule, however, is not exactly the program Arkansas has requested.  The program is optional for recipients, who may opt for traditional Medicaid instead.  Medicaid must provide wraparound services to ensure that a recipient receives all Medicaid benefits, and a recipient may not be charged any cost-sharing in excess of that permitted under Medicaid (see below).  Finally, the cost of purchasing coverage, including administrative expenses and cost sharing, must be comparable to the cost of direct Medicaid coverage.  Arkansas wants to waive freedom-of-choice and several other program requirements and has thus applied for an 1115 waiver instead of implementing a straight premium assistance program

The rule also provides that the 5 percent income disregard for MAGI is only applied to determine income eligibility for the highest-income category for which a person is eligible for Medicaid.  This interpretation is necessary to allow states to obtain the full federal match available for new eligibles in situations where the 5 percent disregard could have made an individual eligible for an existing category, reimbursed at the lower federal match for non-new eligibles.

Medicaid Alternative Benefit Plans.  Much of the preface to the final rule (over 170 pages) is consumed with comments and responses to comments on the rule’s provisions for Medicaid Alternative Benefit Plans (ABPs).  The original Medicaid statute required the states to provide certain categories of medically necessary services, although it also gave the states a great deal of discretion to add optional services.  The Medicaid statute was amended in 2005 to permit the states to enroll certain categories of Medicaid recipients in “benchmark” or “benchmark equivalent” health plans (BPs).  BPs were intended to offer states flexibility in designing benefit packages for the Medicaid population benchmarked to public employee or commercial plans.

The ACA amended the BP provisions of the Medicaid statute to require that BPs ensure coverage of the ten essential health benefits (EHBs) that must be covered also by individual and small-group plans.  These include primarily services already covered by most health plans, such as hospital or ambulatory services or prescription drugs, but also some less commonly covered, such as habilitation services.

ABPs must cover family planning services and supplies and comply with mental health parity requirements (although they are subject to the Medicaid prohibition against covering residential services in institutions for mental disease). EHB designs cannot discriminate based on an individual’s age, expected length of life, present or predicted disability, degree of medical dependency, quality of life, or other health conditions.

The statute requires states to bring their ABPs into compliance with the ACA requirements and to offer them to certain categories of Medicaid recipients, including the adult expansion population in those states that are expanding coverage, by January 1, 2014.  Recognizing that it may be difficult at this point for states to reach this goal by January 1, HHS proposes to work with the states to come into full compliance with these requirements as quickly as possible. HHS states that it does not intend to pursue compliance actions against states that are working toward compliance but have not accomplished it by January 1.

States must select a “base benchmark plan” to determine the EHBs for their individual and small-group non-grandfathered plan from the menu of base benchmark plans available under the ACA.  These include small employer plans, state or federal employee plans, or the states largest commercial HMO plan.  The states must also select a base benchmark plan for their Medicaid ABP, which may be the same or different. States may implement more than one ABP to target different categories of recipients based on different base benchmark plans.

Once the state selects a base benchmark plan, the state must map its benefits to EHB categories, and then supplement or substitute benefits.  It must add any EHBs to a base necessary to fill in any missing EHB required categories.  The state can supply missing required categories of EHBs from other base benchmark plans. The state can also replace one or more benefits within each EHB category as long as it maps to the EHB category and the services are actuarially equivalent to the services that are being substituted. States must notify HHS if they substitute benefits and provide an actuarial certification and analysis if required.

States must ensure as they choose a base benchmark plan and supplement or substitute benefits that they meet certain specific Medicaid requirements.  They must make sure that they comply with requirements of the Medicaid drug rebate program: states must make available the products of all companies that participate in the drug rebate program, although states have enhanced authority to limit access to certain drugs though medical management techniques and may list drugs as non-preferred for cost-sharing purposes.  The preface explicitly says states may impose quantity limits on drugs.  States may not impose limits on access to facilitative services and devices that are more restrictive than limits placed on rehabilitative services and devices covered under the applicable benchmark plan. Pediatric oral and vision care must meet the requirements of the Early and Periodic Screening, Diagnosis, and Treatment (EPSDT) benefit.   Finally, ABP must cover the full range of preventive services included in the EHB without cost sharing.

The final base benchmark plan for Medicaid EHBs arrived at through these steps provides the floor for Medicaid ABP coverage.  States will also select a BP from the menu of plans available under the prior law, including state and federal employee plans, the largest commercial HMO in the states, or state-specific HHS Secretary-approved coverage.  If the BP plan it selects from these options and the plan the state selects as the base benchmark for EHBs are the same, the state meets all requirements of the law.  The final ABP will be the final base benchmark, as supplemented and permissibly substituted as set out above, and further supplemented to the extent necessary to ensure other Medicaid requirements, including coverage of EPSDT services, family planning services, and federally qualified health center and rural health center services.

If the BP option and the selected base benchmark plan are different (including when the state chooses as it BP option Secretary-approved coverage or benchmark equivalent coverage), states have to take further steps to construct their final ABP.   This may include adding benefits from other BP options or more robust available options.  Alternatively, a state can develop its ABP starting with a base benchmark plan and supplementing or substituting benefits to better align with state plan benefits.  States may provide certain additional services to individuals enrolled in an ABP except for individuals in the adult expansion population.

Medicaid recipients who qualify under the adult expansion category must enroll in ABP coverage.  A number of eligibility groups, however, cannot be required to enroll in benchmark coverage, including aged, blind, disabled Supplemental Security Income recipients, dual eligibles, pregnant women with income not exceeding 133 percent of poverty, the medically needy, former foster children, and the medically frail.  The term “medically frail” is defined to include certain children with special needs; individuals with disabling mental disorders or chronic substance abuse disorders; individuals with serious or complex medical conditions; individuals with physical, intellectual, or developmental disabilities that significantly impair their ability to perform one or more activities of daily living, or individuals with a disability determination.  Exempt individuals may enroll in ABP coverage if they choose to.

Medicaid premiums and cost sharing. Lastly, the final rule addresses premiums and cost-sharing under the Medicaid program.  The rule’s provisions addressing these topics are not required to implement the ACA, but rather to update and coordinate provisions for premiums and cost sharing already found in the Medicaid statute.  By definition, people receive Medicaid because their income is too low to afford health insurance or health care without it.  Moreover, there is “extensive research” as commenters pointed out, “that cost sharing on low income populations creates barriers to accessing needed care, with particular consequence for those with special health care needs.”

Nevertheless, Congress has concluded that cost sharing and premiums can be affordable for some Medicaid populations, particularly those with higher incomes, and states have demanded the ability to impose it to discourage moral hazard.  The regulation also permits targeted cost sharing specifically to discourage inappropriate use of emergency rooms and to encourage the use of less expensive, preferred drugs.

Forty-five states including the District of Columbia currently impose cost sharing and 40 states impose premiums.  The CMS Actuary estimates that changes in maximum cost sharing will save the federal government $280 million and states $185 million between 2014 and 2018.

The regulation exempts a number of groups from cost-sharing and premium requirements.  These include lower-income and disabled children; foster children; pregnant women except for non-pregnancy related services; individuals in institutions or home and community-based care whose medical assistance is reduced by available income above a personal needs allowance; individuals receiving hospice care; and individuals receiving Medicaid because of breast or cervical cancer.  Indians eligible to receive care through an Indian heath care provider are exempt from premiums and individuals who have ever received health care from an Indian health care provider are exempt from cost-sharing.

Finally, cost sharing may not be imposed on emergency services as defined in the statute, designated family planning services and supplies, well-baby and well-child preventive services, pregnancy related services, and “provider-preventable” services.

States may not impose cost-sharing for outpatient services (other than drugs and non-emergency services provided in an emergency department) exceeding $4 for individuals with family incomes below 100 percent of poverty, 10 percent of what the agency pays for families between 101 and 150 percent of poverty, and 20 percent of what the agency pays for families with incomes above 150 percent of poverty.  For inpatient stays (including returns to inpatient care within a brief period where treatment is for a condition present in the initial period) the corresponding amounts are $75, 10 percent, and 20 percent.

States may target cost sharing at specific groups with income above 100 percent of poverty and may establish income-related charges for recipients with incomes at different income levels, as long as lower income individuals pay less than those with higher incomes.  They may not target particular disease groups.   The same cost-sharing requirements apply to fee-for-service or managed care providers.

States may distinguish between preferred and non-preferred drugs based on clinical efficacy and cost-effectiveness.  States may charge a maximum of $4 per preferred drugs and $8 for individuals with family incomes below 150 percent of poverty, 20 percent of agency cost where family income exceeds 150 percent of poverty.  Cost sharing for non-preferred drugs can be imposed even on individuals otherwise exempt from cost sharing.

States may impose cost-sharing for non-emergency use of an emergency department, not exceeding $8 for an individual from a family with income below 150 percent of the federal poverty level or in an exempt category.  There is no limit for families with incomes above 150 percent of poverty.  This cost sharing can only be imposed if the emergency department first screens to determine that the individual does not need emergency services, and then, before providing non-emergency services and charging cost sharing, provides the individual with the name and location of an available and accessible alternative non-emergency service provider, determines that the provider can provide services in a timely manner without greater cost sharing, and makes a referral to coordinate services.

In situations where cost sharing is permitted, the state agency must reduce provider payments to reflect cost sharing the provider should have collected, regardless of whether it is actually collected.  Providers must accept payments from Medicaid in this circumstance as payment in full.  This includes providers, like Federally Qualified Health Centers, that may not be legally allowed to charge cost sharing.

Providers may not deny services to a recipient not able to pay for the service except for non-emergency services provided in an emergency department to a beneficiary who is not in an excepted group and who has an income above 100 percent of the poverty level.  Providers may try subsequently to collect authorized cost sharing amounts, and may also reduce or waive cost sharing on a case-by-case basis.  Federal funding to the states is generally not available to cover expenses that should have been covered by recipients through cost sharing or premiums.

The regulation permits states to impose premiums on individuals whose income exceeds 150 percent of the poverty level, but limits the amount of premiums that can be charged to pregnant women, employed individuals with disabilities or individuals in the Ticket-to-Work program, disabled children, qualified disabled and working individuals, and medically needy individuals.  For some of these categories, premiums can be imposed on a sliding scale; for others they are limited to a maximum amount.  The agency can terminate from assistance any individual who fails to pay premiums for 60 days or more other than the medically needy.  Agencies can waive premiums in cases of undue hardship, however.

Medicaid premiums and cost sharing may not exceed a total of 5 percent applied on either a quarterly or monthly (but not annual) basis.  States must track expenses in a manner that does not require beneficiary documentation and must inform beneficiaries and providers when the aggregate limit is reached.  Agencies can establish lower aggregate limits for particular services.  State agencies may impose deductibles if they otherwise comply with regulatory limits.

Agencies must make available to beneficiaries, applicants, providers, and the public a schedule showing groups subject to premiums or cost sharing and current amounts, mechanisms for making payment, consequences of not paying, a list of hospitals charging cost sharing for non-emergency use of the emergency department, and a list of preferred drugs or a way of accessing such a list.

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