September 22, 2010
OLR BACKGROUNDER: MEDICAID PROVISIONS IN FEDERAL HEALTH CARE REFORM-IMPLICATIONS FOR CONNECTICUT
By: Robin K. Cohen, Principal Analyst
You asked how the major Medicaid provisions in the federal Patient Protection and Affordable Care Act (PPACA)(P.L. 111-148, PPACA, as amended by the Health Care and Education Reconciliation Act (P.L. 111-152)), will affect Connecticut's Medicaid program.
The Office of Fiscal Analysis is in the process of developing models to estimate the impact the Medicaid expansions will have on caseload and costs. They will be getting this information out as soon as it is available.
Unless otherwise noted, the effective date for the new laws' provisions is January 1, 2014.
The PPACA contains many provisions related to the Medicaid program including:
1. expanding program eligibility and changing the way eligibility is determined in some cases;
2. financing the program expansions through higher federal matching funds; and
3. offering additional services, but also allowing states to substitute benchmark benefit packages for the newly eligible.
Many of these do not go into effect until January 1, 2014, but several must be implemented sooner, some retroactive to the law's effective date (March 23, 2010), and some may be phased in between April 1, 2010 and January 1, 2011.
It is difficult to say what the actual impact will be on the state's Medicaid program. Additional individuals already are receiving, or will become eligible for, benefits. The conversion of the State-Administered General Assistance (SAGA) program to Medicaid is expected to cut by $53 million the state's costs for this previously state-funds only program. In the short-term, the federal government will reimburse the state for half of the coverage expansion cost; beginning in 2014, the federal share is 100% and remains well above the state's existing 50% match until the end of the decade. Because of this, these expansions would be expected to have a minimal impact on the state's budget.
Likewise, the increase in reimbursement rates to providers should encourage more clinicians to participate.
Mandatory Coverage of Childless Adults, Caretaker Relatives, and Former Foster Children with Income up to 133% of Federal Poverty Level (§ 2001)
One of the most significant provisions in the new law is its requirement that states offer Medicaid coverage to anyone with income up to 133% of the federal poverty level (FPL, $14,404 annually for one person) by January 1, 2014. Although children up to age 19 generally have coverage at this income level, the act requires it for three additional categories: (1) single, childless adults under age 65 who do not have a disability; (2) caretaker relatives; and (3) former foster children up to the age of 26 (see below). Until recently, Connecticut did not offer Medicaid to non-elderly or disabled adults except to caretaker relatives of children receiving Medicaid with incomes up to 185% of the FPL.
Coverage for Former Foster Children. The federal law establishes a mandatory Medicaid coverage group for former foster children under age 26 who (1) are not otherwise Medicaid-eligible, and (2) were in the foster care system when they turned 18 or a higher age that the state sets for ending foster care benefits and were enrolled in Medicaid when they
aged-out of that system. Benefits include the regular Medicaid package, including services required under the Early and Periodic Screening, Diagnosis, and Treatment (EPSDT) program.
Implications for Connecticut. Connecticut was the first state to receive federal approval to expand Medicaid coverage under the new federal law when it recently began this coverage retroactive to April 1, 2010 (as permitted by federal law). About 45,000 additional adults are now covered by Medicaid.
Public Acts 10-3 and 10-1, June Special Session, direct Department of Social Services (DSS) to convert the State-Administered General Assistance (SAGA) medical assistance program to Medicaid under the PPACA provision. The SAGA medical assistance program was available only to individuals with incomes of about $500 per month (if living in most areas of the state), which is about 55% of the FPL, and these and other eligibility criteria remain in effect until the earlier of when the legislature changes them or 2014.
Connecticut's HUSKY A (Medicaid) program generally does not cover children over age 19, except that children who age-out of the state's foster care system are covered up to age 21 through the state's HUSKY A program. According to the Department of Children and Families, approximately 2,900 children are currently receiving this coverage.
Optional Coverage for Individuals with Incomes Above 133% of FPL (§ 2001)
The new federal law gives states the option to provide Medicaid coverage to individuals with a “modified adjusted gross income” (see below) above 133% of the FPL, either through traditional Medicaid or supplemental wrap around benefits (to be used by individuals with access to other insurance that may have benefit package inferior to Medicaid's).
Implications for Connecticut
DSS has not determined whether it will seek to offer this additional coverage.
Optional Coverage for Family Planning Services (§2303)
The new federal law permits states to add a new optional coverage group consisting of (1) nonpregnant women with income up to the highest applicable limit used for pregnant women under the Medicaid or State Children's Health Insurance Program (SCHIP) state plan (i.e., 250% of FPL) and (2) individuals eligible for these services under a federal waiver that provides family planning services and supplies. The coverage is limited to family planning services and supplies and related medical diagnosis and treatment services. This provision became effective upon passage.
The PPACA also allows states that offer the family planning option to determine eligibility for it presumptively. This means that applicants can supply a more limited proof of their income and be determined eligible more quickly, with the state Medicaid agency following up later on with a more thorough review.
Implications for Connecticut. Connecticut law (CGS §17b-260c) requires DSS to apply for a Medicaid waiver to create this coverage group for households with incomes up to 185% of the FPL. Connecticut's upper limit for pregnant women's Medicaid coverage is 250% of the FPL, so the income limit for the optional group would be higher. DSS has never applied for this waiver.
DSS has established a target date of October 2010 for the new state plan coverage to begin. The legislature may wish to codify it as the federal law is permissive. It would also need to amend the law to reflect that the service will be available under the state's Medicaid plan, not as a waiver, and at a higher income level.
The Guttmacher Institute, a nonprofit organization that advances sexual and reproductive health in the U.S. and worldwide through a program of social science research, policy analysis, and public education, has analyzed the impact that family planning coverage would have on states. In a 2006 report, it estimated that if Connecticut adopted this coverage at 250% of FPL, during the third full year:
1. 51,900 people would participate;
2. 3,100 Medicaid births would be averted; and
3. the state would save about $6 million, which is the difference between the savings from fewer Medicaid births (about $12,000 per birth) and the costs of providing the family planning services.
We asked DSS if it intends to also implement presumptive eligibility but it has not responded.
ELIGIBILITY DETERMINATION RULES (§ 2002)
Use of Modified Adjusted Gross Income (MAGI)/Elimination of Asset Test
Starting January 1, 2014, states can no longer use traditional income disregards for many Medicaid applicants. (Disregards enable applicants to have higher incomes and still qualify for assistance because states disregard a portion of the income.) Instead, states will determine eligibility based on the applicant's modified adjusted gross income (MAGI), which is an individual's (or couple's) total income reported to the Internal Revenue Service plus tax-exempt interest and foreign earned income.
States must determine the dollar equivalent of the difference between the upper income limit on eligibility for an individual (expressed as a percentage of the FPL) and the upper income limit increased by 5%. Thus an individual could have income that was 5% more than the 133% of FPL amount and still qualify since the excess 5% would be disregarded. Using current poverty guidelines, an individual could meet the 133% of FPL limit ($14,403 annually or $1,200 per month) if his or her income was $720 (5%) higher than the 133% figure, $1,920 per month.
Existing Medicaid income counting rules will still apply for certain exempted groups, including:
1. individuals eligible for Medicaid through another program (categorically eligible, e.g., foster care, Supplemental Security Income)
2. elderly or Social Security Disability Insurance program beneficiaries;
3. the medically needy (and spend-down);
4. enrollees in the state's Medicare Savings Program; and
5. SCHIP optional targeted low-income children.
Elimination of Asset Tests. Beginning January 1, 2014, the federal law prohibits states from using an asset test for Medicaid eligibility determinations for the groups affected by the MAGI provision.
Implications for Connecticut. It would appear that the MAGI methodology will apply to individuals who are eligible for Medicaid under the PPACA expansion. It is unclear if this provision will affect the state's other Medicaid eligibility groups. For example, adult caretaker relatives of children enrolled in HUSKY A can have income up to 185% of the FPL but there is no disregard that would allow the parents to have more income than the limit. We have asked DSS what it believes the impact will be and are still awaiting its response.
Benchmark Coverage (§ 2001)
The PPACA guarantees all “newly eligible” Medicaid enrollees (e.g., former SAGA medical assistance enrollees in Connecticut) a benchmark or benchmark-equivalent package of benefits that are consistent with provisions in the federal Deficit Reduction Act (DRA) of 2005 and amendments to it.
In agreement with the DRA, PPACA permits states to offer certain Medicaid enrollees a more limited benefit package, provided the package has the same actuarial value as certain existing plans, such as that offered to federal and state employees.
The benchmark coverage must include:
1. inpatient and outpatient hospital services;
2. physician services;
3. lab and x-ray services;
4. well-child care, including immunizations; and
5. other appropriate preventive care as the U.S. health and human services secretary prescribes.
The benchmark coverage must also include at least 75% of the actuarial value for prescription drugs, mental health services, vision care, and hearing services. The PPACA requires the prescription drug and mental health services to have the same actuarial value as the benchmark. It also requires that the mental health coverage ensures compliance with the federal Mental Health Parity Act and deems EPSDT mental health coverage to be in compliance with that act.
Individuals who have disabilities, and those who are pregnant, blind, dually eligible for Medicaid and Medicare, in foster care, or have special medical needs must receive the entire Medicaid package.
Implications for Connecticut. DSS sent letters to SAGA recipients (the newly-eligible Medicaid coverage group) on June 30, 2010 stating what their benefit package would include. (Apparently, these are the same benefits available to individuals enrolled in the state's Medicaid fee-for-service program.) In addition to the services listed above, the newly eligible Medicaid recipients can get:
1. home health care;
2. transportation for Medicaid appointments;
3. residential and ambulatory detoxification;
4. methadone maintenance;
5. emergency care;
6. medical equipment, devices, and supplies;
7. eye and dental care;
8. nursing home care;
9. mental health group home care; and
10. targeted case management.
Smoking Cessation (§§ 4107, 2502)
The PPACA requires states to provide Medicaid coverage for comprehensive tobacco cessation services for pregnant women enrolled in the program. This provision is effective October 1, 2010.
The federal act also prohibits states, beginning January 1, 2014, from excluding smoking cessation drugs in their Medicaid programs.
Implications for Connecticut. DSS has indicated that its target date for smoking cessation coverage for pregnant women is October 1, 2010. We asked DSS if it intends to provide the drug coverage for nonpregnant beneficiaries but it has not responded.
Freestanding Birth Centers (§ 2301)
States historically have had the option of covering clinic services provided by or under the direction of a physician and can receive federal matching funds when they do so. Previously, nothing in federal law authorized federal matching funds for direct payment states made to freestanding birth centers when they were not operated by a physician.
The PPACA makes coverage of services at freestanding birth centers mandatory. The services may be accorded to Medicaid recipients so long as they are furnished at a health facility (1) that is not a hospital,
(2) where childbirth is planned to occur away from home, and (3) is licensed or otherwise authorized by the state to provide prenatal labor and delivery services.
This provision went into effect on passage.
Implications for Connecticut. DSS intends to begin implementing this provision in October 2010.
REIMBURSEMENTS TO PROVIDERS
Increase Payment Rate to Medicare Rate (§ 1202 of P.L. 111-152)
In 2013 and 2014, the federal act requires Medicaid payment rates to primary care physicians be at least equal to the Medicare payment rates. The federal government will pay 100% of the difference between what the state was paying before the change and the new, higher rates.
Implications for Connecticut. DSS indicates that it will start paying the higher rates on January 1, 2013. This should not have a fiscal impact as the federal government will pay the additional costs. But it could cause costs to rise if it encourages more providers to participate in the Medicaid program and more Medicaid enrollees seek the primary care services that they provide. Many assume that this provision will increase the number of physicians willing to participate in the Medicaid program, a number that historically has been quite low. Any increase in costs associated with more primary care visits could be offset by a decrease in emergency room use.
FEDERAL MATCHING FUNDS
Increase in Federal Medical Assistance Percentage (FMAP) (§ 2001 of P.L. 111-148, as amended by § 1201 of P.L. 111-152)
The new law provides significant federal financial support to the states, largely by increasing for seven years the FMAP it offers starting in FFY14 for “newly eligible” Medicaid recipients (e.g., single adults). Table 1 illustrates this. Under the current reimbursement rules, the state would receive only a 50% federal match. (The newly eligible SAGA coverage group, like the state's other Medicaid coverage groups, is eligible for an enhanced federal match of 61.9% through June, 2011, as authorized by the American Recovery and Reinvestment Act of 2008 and a Congressional extension to it.
TABLE 1: INCREASING FMAP FOR NEWLY ELIGIBLE INDIVIDUALS
Likewise, PPACA provides for a relatively small, enhanced FMAP to states for expenditures on individuals who are not newly eligible.
Implications for Connecticut. It is not known at this time what the impact of the increased FMAP for states will be.
MANDATORY PREMIUM ASSISTANCE FOR THE UNDERINSURED
The PPACA requires states to offer premium assistance and wrap-around benefits to Medicaid recipients who are offered employer-sponsored insurance if it is cost effective to do so. Previously, states had the option to do this. This provision goes into effective on January 1, 2014. Wrap around benefits are those benefits that the employer's plan does not cover but are part of the state's Medicaid package.
Implications for Connecticut. Connecticut's Medicaid program offers premium assistance but the take-up rate historically has been very low. If more recipients were to be offered and accept employer-sponsored coverage, the cost of their Medicaid benefits would be expected to fall.
Rebates (§ 2501)
The PPACA generally increases the minimum rebate that manufacturers whose drugs are covered by state Medicaid programs must provide to the state. It increases the rebate paid for brand name drugs from 15.1% of the quarterly average manufacturer price (AMP) to 23.1% of AMP. For generic, the minimum rebate rises from 11% of the drug's quarterly AMP to 13% of AMP. PPACA made the increases retroactive to January 1, 2010.
Implications for Connecticut. It is not clear how much additional savings Connecticut will realize, if any, as a result of this provision. State Medicaid programs must share the rebates with the federal government based on the level of reimbursement the state receives. And the state is already receiving supplemental rebates for those drugs on its preferred drug list. This, too, may have an impact on the amount of additional rebate it receives.