Feds Signaling Maximum Flexibility to States on Medicaid Expansion

Governing magazine reported today that Cindy Mann, deputy director of CMS, told an audience of state legislators gathered at the NCSL annual meeting in Chicago that the federal government did not anticipate setting any deadlines for states to decide on Medicaid expansion. Further, a department spokesperson confirmed that a state could initially expand Medicaid coverage and then decide to reduce it.

Presumably, a state might consider pulling back on coverage when the required state match kicks in beginning in 2017. In the first three years, 2014-2017, the federal government covers the full cost for newly eligibles. Then the state match increases until it reaches 10 percent in 2020 and beyond. Some governors have predicted that the federal government will not be able to afford a 90-10 match across time and states will end up footing more of the bill for expanded coverage.

While conventional wisdom has held that a decision to withdraw health care insurance after expansion is political suicide, since the 2008 recession some states, including Arizona and Maine, have sought and received permission from DHHS to reduce Medicaid coverage for certain groups of individuals.

The Supreme Court decision the end of June gave states the green light to decide whether to raise Medicaid eligibility for all individuals to 133 percent of the federal poverty level without risking their current Medicaid funding. Already a handful of governors have announced that they would not expand Medicaid eligibility but this new flexibility might cause some to reconsider how to poise their state to take maximum advantage of federal funding. Some pundits have speculated that following the November elections, governors may moderate their positions of Medicaid expansion, suggesting that the carrot of full federal funding for three years will be too much for states to reject.

A number of other policy questions remain unanswered by DHHS. They include whether states can expand eligibility partially. For instance, would an expansion to 100 percent of the federal poverty level be allowable? Recognizing that very low income individuals will not be eligible for subsidies to purchase insurance through the exchanges (originally unnecessary as the federal health care reform law mandated Medicaid expansion to provide insurance coverage for this population), states are asking if Medicaid funds with the federal match, can be used to provide subsidies in the states. The National Association of Medicaid Directors sent 30 questions to CMS just days after the Supreme Court ruling.

In the coming months CMS will be issuing policy directives and regulations to guide states as they grapple with their decisions on Medicaid expansion. The newest Congressional Budget Office estimate reduces the number of Americans who will gain expanded Medicaid coverage from 13 million to 7 million as states opt to forego Medicaid expansion.