KHI News Service

State Medicaid directors want flexibility to trim rolls, control costs

By Dave Ranney | May 16, 2011

Governors seeking more flexibility from the federal officials to manage Medicaid costs have a new ally.

The National Association of Medicaid Directors recently joined the governors in urging federal officials to “find more workable interpretations” of federal rules that limit states’ abilities to adjust eligibility requirements for both Medicaid and the Children's Health Insurance Program (CHIP).

In a May 6 letter to Cindy Mann, deputy director of the Centers for Medicare and Medicaid Services, the association urged the agency to create a template that would provide “clarity” to states seeking waivers from what are known as maintenance of effort (MOE) requirements.

“As we examine opportunities to improve the Medicaid program’s efficiency and reduce costs for both the state and federal governments, there are a number of common sense solutions that could improve the management of Medicaid during this critical period,” the letter stated.


MOE Letter from Andy Allison

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MOE Letter to Sebelius

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The letter was signed by association’s president, Andy Allison, executive director at the Kansas Health Policy Authority, and Darin Gordon, the association’s vice president and director of the Medicaid program in Tennessee, TennCare.

Last year, CMS denied a Kansas Health Policy Authority plan to raise HealthWave premiums by as much as $40 per family, depending on household income. In Kansas, the part of Medicaid that provides care to low-income families has been combined with CHIP to form HealthWave.

In Congress, Republicans have introduced bills to repeal the maintenance of effort requirements, arguing they would give states the flexibility they need to rein in health-care costs. Many Republican governors, including Kansas’ Sam Brownback, have also urged federal officials to relax the requirements.

The Affordable Care Act prohibits states from adopting Medicaid eligibility criteria that are more restrictive than those in place when the health reform law took effect in March 2010. The requirement lapses in 2014, when millions more Americans and more than 100,000 Kansans will become eligible for an expanded Medicaid program.

Under the ACA, the federal government will pick up 100 percent of the costs of serving those who become eligible for Medicaid because of the expansion. Currently in Kansas, the federal government covers about 60 percent of Medicaid’s $2.8 billion cost with the state paying the balance.

“Since the maintenance of effort went into effect in 2008-2010, enrollment grew nearly 18 percent to 345,000 and spending will reach nearly $2.8 billion,” Brownback wrote in a March 9 letter to U.S. Department of Health and Humans Services Secretary Kathleen Sebelius,” referring to Kansas’ Medicaid program. “These numbers are not sustainable in the world of balancing state budgets.”

Not everyone is lobbying for more flexibility.

Associations representing the nation’s hospitals have warned that relaxing the MOE requirements would lead to states trimming their Medicaid rolls, shifting the cost of caring for the uninsured onto hospitals.

“Removing people from Medicaid does not keep them from getting sick and will deter them from seeking the care that they need,” the associations wrote in a March 1 letter to Sebelius. “Further, it shifts the burden of their care from states and the federal government largely onto the nation’s hospitals. Hospitals currently provide some $40 billion in uncompensated care and the loss of the Medicaid MOE will only increase this burden on providers.”

The letter was signed by the American Hospital Association, Association of American Medical Colleges Catholic Health Association of the United States, Federation of American Hospitals, National Association of Children’s Hospitals, National Association of Public Hospitals and Health Systems, and VHA Inc.

Sebelius, as yet, has not responded to the association of state Medicaid directors’ letter. But during a May 11 teleconference with reporters, she said calls for relaxing maintenance of effort requirements were off-target.

“What we’ve been trying to do at the department level is educate a lot of our new governors who’ve come into office recently about where the cost drivers are in Medicaid program,” Sebelius said. “It’s not in the millions of children who are covered; it is not the millions of pregnant women who are covered.”

Instead, she said, the program’s costs are driven by the 9.2 million enrollees who — because of their age, disability and below-poverty income — are eligible for both Medicare and Medicaid.

Most of these so-called “dual eligibles” have chronic illnesses. Typically, costs associated with their care are six times higher than those for a non-disabled Medicaid enrollee.

“The overall cost, right now, for these 9.2 million people is about $120 billion a year,” Sebelius said. “Reducing these costs by just a fairly limited percentage will yield huge cost savings, would be a much more patient-centered way to provide health care, and would have much better outcomes for the individuals involved.”