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OFFICE OF THE FIRST LADY
DOMESTIC POLICY COUNCIL
FILE INVENTORY
File Type:
Manila Folders / Loose Files
File Size:
Letter
File Contents:
Medicare Reform/ Republican Budget 1995
50F8
MEDICAID BRIEFING MATERIALS
IMPACT OF 1995 REPUBLICAN BUDGET CUTS ON CHILDREN
IMPACT OF 1995 REPUBLICAN BUDGET CUTS ON STATE TAXES
IMPACT OF 1995 REPUBLICAN BUDGET CUTS ON MEDICARE
TITLE XI- CHILD CARE
REPUBLICAN TALKING POINTS
FACTS ON REPUBLICAN PROPOSAL
PLAN COMPARISON: MEDICARE/MEDICAID
COALITION RECONCILIATION ACT
HEALTH CARE LEGISLATION 1995
-Simon
-Dole
-Daschle
ENCLOSURES FILED OVERSIZE ATTACHMENTS 12508
NARA 9877
March 1, 1996
TO:
Chris Jennings
Jen Klein
FROM:
Jack Ebeler
SUBJECT:
Medicaid Briefing Materials
We used the attached documents to brief the Secretary for her recent appearance before the
Senate Finance Committee. The first document--National Governors' Association Medicaid
Proposal: Summary of Provisions and Top Line Concerns--was the basis for a policy briefing.
The second document--Medicaid Policy Briefing: Background Materials- is a compilation of
existing information that was used as background material. I thought you might find these
materials useful.
MEDICAID POLICY BRIEFING
BACKGROUND MATERIALS
FEBRUARY 23, 1996
NATIONAL GOVERNORS' ASSOCIATION
MEDICAID PROPOSAL
-
Summary of Provisions and Top Line Concerns
February 23, 1996
ADMINISTRATION'S PRINCIPLES ON MEDICAID
The President's stand on Medicaid throughout the budget debate has been very successful because it is grounded in sound principles
that are reinforced by his well-known personal commitment to health care coverage. He has insisted on a balanced approach to
Medicaid reform that:
preserves the federal guarantee of a Congressionally-defined benefit package for Medicaid beneficiaries;
preserves Medicaid protection for currently eligible groups;
maintains our shared financial partnership with states as they provide health coverage to needy individuals;
provides unprecedented new flexibility to states in how to operate their programs, pay providers of care, and operate managed
care and other arrangements, with continuing programmatic and fiscal accountability; and provides federal savings that
contribute to the balanced budget plan.
NATIONAL GOVERNORS' ASSOCIATION MEDICAID PROPOSAL: OVERVIEW
1.
Repeals Title XIX. The NGA plan repeals title XIX and replaces it with a new title.
2.
Repeals Real Enforceable Guarantee: the Entitlement. The NGA plan "guarantees" certain eligible groups
coverage for a list of benefits that are also "guaranteed."
But the guarantee is not real, because it does not include key provisions related to:
--
Eligibility
--
Benefit Definition
--
Enforcement
3. Questionable Financing. The NGA plan (especially the Democratic Governors) seeks to set up a federal financing plan in
which the financing adapts to changing enrollment.
While there may be progress, the specifics are not out, and will likely lead in one of two directions:
--Either it will be open funding, leading to budget problems, or
--It will, in reality, be a block grant plus a contingency
State financing mechanisms are unacceptable
--
FMAP increases
--
Provider Donations and Taxes are allowed without limitation
4.
Does Not Address Key Protections. The NGA plan does not include key standards and protections.
The proposal is silent on key beneficiary and family financial protections, including spousal impoverishment (may be
addressed) and responsibility of adult children for their parents' nursing home care.
Quality: does not include federal enforcement of OBRA 87 nursing home standards; does not include ICF/MR standards;
does not include managed care standards.
5.
Other Provisions. Service delivery, provider standards, and reimbursement
NATIONAL GOVERNORS' ASSOCIATION MEDICAID PROPOSAL: PROVISIONS AND CONCERNS
1.
PROVISION: Repeals Title XIX
The NGA would repeal the existing Medicaid statute, title XIX of the Social Security Act, and replace it with a new title of the Act.
TOP LINE CONCERNS:
The NGA proposal to replace title xix with a new title of the Social Security Act has serious consequences:
It would increase litigation
It would reduce beneficiary and provider protections
It would complicate state efforts to implement Medicaid reform
SPECIFIC CONCERN: Repeal of Title XIX
Medicaid has evolved through many years of Congressional debate and problem solving to balance the needs and interests of States,
providers, beneficiaries, and the Federal government. Certain Medicaid principles must be retained: protection of the entitlement to a
meaningful benefit package, continuation of the Federal/State partnership, and assurance of program and fiscal accountability.
Changes to the Medicaid law should not attempt to fix what is not broken. Changes that do need to be made can best be accomplished
within the existing framework of title XIX, for the following reasons:
Reduces litigation. Using the current structure does not open up issues that have been settled for many years. Using a new title, as
MediGrant II and the NGA proposal would, could result in new litigation that would be contentious and costly, even where Congress
expressed a general intent to continue parts of the program as under current law. For example, even if the new title repeated the same
words for title XIX, the courts could still be required to review the intent of the passage as if it were a new provision. Thus, requiring time
and energy to retain provisions current settled, plus the possibility that new rulings could be made that contradicted current accepted
policies.
Protects beneficiaries, providers, and States. In addition to the many legal and administrative issues that must be addressed, the
current statute provides important protections to beneficiaries, providers, and States. These issues are addressed inadequately, or not at all,
in MediGrant II and the NGA proposal. Revision (rather than replacement) of title XIX could avoid problems as the following:
Beneficiaries know they can count on receiving Medicaid benefits under certain conditions. Some of these conditions would be
changed deliberately to reflect new federal or state policy decisions under Medicaid reform. However, others may change
inadvertently if title XIX were replaced rather than revised, with serious unintended consequences for vulnerable beneficiaries. For
example:
Presumptive eligibility for poor pregnant women that guarantees early access to prenatal care could be lost, with serious
negative consequences for the health status of both mother and child.
Patients in nursing homes and institutions for the developmentally disabled could lose the guarantee of medical reviews,
which are important as a safeguard of quality of care and as a protection against abuse.
Provider willingness to participate in Medicaid under the existing statute may be reduced if the statute were replaced. With reduced
provider participation, beneficiary access could be significantly reduced. For example:
Provider expectations that they can rely upon States to be reliable business partners, such as the guarantee of prompt
payment, in the existing statute, may no longer be met if title XIX were replaced.
Provider (and beneficiary) protections from limits on cost-sharing in the existing statute may be lost in a replacement.
States have many due process guarantees and established procedures in the existing title XIX that may be lost in a replacement. For
example:
State are guaranteed appeal rights and other due process protections in the case of State plan disapprovals, non-compliance,
and financial disallowances contained in numerous cross-references between the current title XIX and other statutory
provisions which may be lost in a replacement statute.
States have specific authority to collect payments that Medicaid beneficiaries would otherwise receive for services already
paid by Medicaid (for example, settlement of lawsuits due to auto accidents).
States have the authority to legally enforce medical support obligations of absent parents for their children, thus saving
Federal and State Medicaid funds.
Eases State implementation. Following enactment of Medicaid reform legislation, States could begin revising their existing programs
more easily if the familiar ground of the existing Medicaid statute were revised rather than replaced. Replacement could lead to start up
costs and delays in implementation, with short term savings much more limited and long term savings seriously compromised.
Replacement could also lead to problems such as:
Delays in developing State implementing legislation would be a greater problem--particularly in States where the legislature
meets only once every two years.
Development and issuance of new regulations and procedures would be more likely to reopen debate among competing
interests, leading to further delays.
All program forms, provider agreements, data systems, administrative systems, and survey and certification procedures
would need more extensive re-examination and revision and staff would need more re-training.
NATIONAL GOVERNORS' ASSOCIATION MEDICAID PROPOSAL: PROVISIONS AND CONCERNS
2.
PROVISION: The "Guarantee": Eligibility
Coverage is "guaranteed" for the following groups:
Coverage is optional for the following groups:
Pregnant women to 133 percent of poverty
All other current law mandatory and optional groups
Children to age 6 to 133 percent of poverty
Other individuals or families as defined by the state but
Children age 6 through 12 to 100 percent of poverty
below 275 percent of poverty
The elderly who meet SSI income and resource standards
Persons with disabilities - "disability" defined by the state
Medicare cost sharing for Qualified Medicare
Beneficiaries (QMBs)
Families who meet current AFDC income and resource
standards; or states may run a single eligibility system for
those who are eligible for "new welfare"
TOP LINE CONCERNS:
Medicaid will not be phased in for children age 13 to 18 under 100 percent of poverty
States can apply more limited definitions of disability than exist under federal law
Medicaid "guaranteed" coverage does not extend to all aged disabled and blind recipients of SSI
States that reduce welfare coverage can thereby sharply reduce Medicaid coverage
Welfare-related coverage options unclear
There is no requirement for Medicaid coverage for welfare recipients transitioning to work (NGA may address this)
275% of poverty would cover ½ of the total population
SPECIFIC CONCERNS: Eligibility
While the NGA plan includes a number of mandatory groups, it repeals the current law phase-in of Medicaid coverage for children
ages 13-18 in families with income below the federal poverty level -- repealing a coverage expansion signed into law in the last
Administration.
The plan repeals the federal standard for defining disability, replacing it with state definitions which could be more limited than
those that exist under federal law. This could result in very limited coverage for a population whose service needs are among the
most costly. For example, states could define disability in ways that preclude individuals with certain diagnoses (HIV, or mental
illness) from being able to receive needed services under Medicaid. This is particularly significant because the people who are
eligible for Medicaid because they are disabled are by definition unable to work and therefore less likely to have other health
insurance.
Current welfare reform proposals include changes in key areas in the definition of disability to address substantive concerns raised
by states and others. These proposals will have a significant impact on coverage of the disabled.
In the case of drug addicts and alcoholics, the proposal (accepted by the Administration) would change program eligibility
to exclude drug addiction and alcoholism as a qualifying disability for purposes of SSI and Medicaid.
In the case of disabled children, effective in 1998, the proposal would change the eligibility process by eliminating the
Individual Functional Assessment (IFA) process and eliminating maladaptive behavior from inclusion in the Social Security
Act.
Welfare related coverage is very unclear, and the NGA resolution provides insufficient information about the links between new
welfare definitions and Medicaid coverage. Specifically, we do not know whether individuals who are currently covered by
Medicaid would retain that coverage under welfare reform proposals.
NGA MEDICAID PROPOSAL: PROVISIONS AND CONCERNS
2.
PROVISION: The "Guarantee": Benefits
The following services are "guaranteed" for "guaranteed" populations:
-Inpatient/outpatient hospital
-Physician
-prenatal care,
-nursing facility services
-home health care
-family planning services and supplies
-lab and x-ray
-pediatric and family nurse practitioner
-nurse midwife services
-EPSDT, with limitations on requirements for treatment
All other services defined as optional under the current Medicaid program would remain optional
States would have complete flexibility in defining adequacy of amount, duration, and scope of benefits
Long term care options would be broadened significantly
TOP LINE CONCERNS:
Complete state flexibility in amount, duration, and scope could lead to inadequate benefit packages
Lack of provision dealing with comparability could lead to discrimination by diagnosis or eligibility group
Lack of provision dealing with statewideness could lead to discrimination geography
There are no benefit requirements for optional groups
Treatment services limitation for EPSDT could lead to serious service loss for needy children
FQHCs/RHCs are not included as mandatory, no other specific provisions made (such as a pool)
Status of Vaccine for Children Program, status of Drug Rebate Program are not addressed in the NGA resolution
The approach to expanding the long term care options is not specified
SPECIFIC CONCERNS:
Benefits
Even given the apparent progress made in defining a mandatory benefit package--particularly when compared to the Conference
Agreement--there are still serious concerns with the provisions of the NGA resolution, because it does not include certain standards related
to the listed benefits
A responsible health care program must provide benefits that are adequate to achieve their purpose. Under current Medicaid law
and regulation benefits must be "sufficient to reasonably achieve their purpose." Under the NGA resolution, states would be given
complete flexibility to define the amount, duration and scope of the benefits to be provided. There is a concern that the Secretary
would have neither criteria or the ability to disapprove a benefit package that would be effectively meaningless, if a state were to
offer severely restricted benefits.
Because the NGA resolution is silent about requirements for comparable services for eligible groups, or provision of services on a
statewide basis, there is concern that states might structure benefit packages that are more limited for more costly populations, (e.g.,
the disabled), or might provide less comprehensive services in certain parts of the state. In general, the services available to any
categorically needy individual must be equal in amount, duration and scope to those available to any other categorically needy
beneficiary. Services available to medically needy individuals must be equal in amount, duration, and scope for all persons in the
covered group. There are serious questions about the equity that might result under the NGA approach.
The NGA would limit the treatment option under EPSDT in a manner that is still unclear. The concern that generated this NGA
provision is that under current law if a child is diagnosed through EPSDT as needing services that are not covered under the state's
plan, the state must provide the services anyway. One of the NGA options would be to limit the treatment services to only those
covered in the state's plan. We have not offered to change the current set of requirements in this area.
The Administration has indicated a willingness to discuss additional flexibility in the area of benefit packages(see flexibility paper)-
-e.g., offering optional benefits to optional beneficiaries in the context of the President's plan.
NGA MEDICAID PROPOSAL: PROVISIONS AND CONCERNS
2. PROVISION: The "Guarantee": Private Right of Action
Basic design is to prevent individual suits on benefits in federal court
Must exhaust state administrative remedies before going to state court
Individuals and classes have right of action in state court
After completion of state court action, can petition US Supreme Court
Secretary can bring action in federal court for individuals not providers or health plans
No private right of action for providers/plans
TOP LINE CONCERNS:
No right of action = no guaranteed federal entitlement for individuals.
Lack of federal enforcement by beneficiaries makes Medicaid unique among federal programs--the only program with federal
requirements and with no ability to enforce them.
Absence of federal interpretation creates inconsistency across states.
State courts have more limited remedies.
Most suits against states are brought by providers seeking relief on payment rate issues, not individuals seeking eligibility or
benefits.
SPECIFIC CONCERNS: Right of Action
The NGA resolution contains provisions requiring states to provide a guaranteed state right of action, but eliminates any federal right of
action for individuals and providers. The only access to federal court would be the opportunity to petition the U.S. Supreme Court for
review from a decision of state's highest court. The NGA provisions pose a number of serious questions and concerns.
Implicit in the concept of defined populations and defined benefits is the back-up of a meaningful enforcement mechanism. A
federal cause of action for beneficiaries assures that those seeking a remedy for the deprivation of medical care receive the same
due process rights everywhere in the United States.
Under the NGA proposal, Medicaid would be the single federal statute conferring no possibility of federal enforcement by its
intended beneficiaries. Seeking enforcement of title XIX would be the one cause of action arising under federal law that would be
barred from the federal courts. This unprecedented step would be seen by important constituencies as a signal of second-class
status and would set off massive reaction from beneficiary groups and their allies. Under the NGA proposal, the poor and their
advocates would be restricted to the remedies and procedures available under state law, which are often stricter than those under
federal law.
The largest number of suits against states have been filed by providers over payment rates. Under the administration's plan, the
Boren Amendment would be repealed, thereby eliminating these causes of action by providers. We have also indicated a
willingness to specify that there would be no right of action by providers over payment rates under any statutory provisions as well.
Under the Administration's plan, state concerns about limiting their exposure to suit in federal court would be largely resolved.
Given the broader federal policy and the reality that beneficiary suits have been less of a problem, further changes to individual
right of action would appear to be unnecessary.
Those aspects of the Medicaid program that are common to all states should be subject to consistent interpretation and
administration. Efficiency and predictability are best served by using the federal court system, when the same question arises
across multiple jurisdictions. Moreover, when Medicaid-based claims interact, as they often do, with other areas of federal law
(Medicare, Social Security), the federal courts are more experienced in analyzing these statutory relationships and are better able to
understand and decide cases with potentially broad ramifications.
NGA MEDICAID PROPOSAL: PROVISIONS AND CONCERNS
3. PROVISION: Financing
Based on federal-state matching; FMAP increased, state share no greater than 40%.
Each state gets a maximum federal allocation based on:
Base aliocation: 1993,1994 or 1995, with adjustments to correct for anomalies
Growth: supposed to account for estimated changes in enrollment, plus an inflation factor
Special grants (all federal): to certain states for illegal aliens and IHS and related facilities
Insurance umbrella: additional funds for states to account for unanticipated enrollment
--offers capitation payments for excessive enrollment of "guaranteed" groups and the optional portion of the elderly and
disabled
--not available without demonstrable need; states must use other available funds first
DSH funds included in base, no growth if more than 12% of total program expenditures
Donations and taxes restrictions eliminated
TOP LINE CONCERNS:
Maximum federal allocation = Block Grant with contingency fund
Federal funding increases in an uncapped program; federal role in program decreases
Base Calculations are complex and arbitrary, i.e.:
--three year option
--adjustments for anomalies (criteria to be determined)
--inclusion of DSH in base creates inequity among states
--calculation of base on total spending V. spending per person
Growth calculations are not described in detail
--based on estimated not actual
--national rate V. state specific rate
--adjustments for case mix
--nature of inflation factor
FINANCING
TOP LINE CONCERNS: (Continued)
Special Grants lack adequate detail
--service definitions are unclear , e.g., "IHS-related facilities"
--size of grants: total and per state
--criteria for award
Insurance Umbrella raises question about total funding cap V. open ended funding
--unnecessarily complex if purpose is to achieve per capita funding
--definition for "use up" available funds needed
--relationship of base calculations to future years is unclear
--payment and reconciliation process
--potential gaming by underestimate of growth to facilitate access to funds
Federal expenditures could rise substantially because there are no protections against states using recycling schemes to generate
excessive federal matching dollars; at the same time "real" state expenditures will fall due to these schemes.
Scoring this proposal without additional details will be difficult.
As details come out, it will most likely be either too costly, or a block grant "plus."
SPECIFIC CONCERNS: Financing
The National Governors' Association resolution would replace the current financing system with a combination of a fixed federal payment,
and a payment adjustment for unexpected excess enrollment. The minimum federal contribution to the financing of Medicaid would
increase from 50 percent to 60 percent, and states' use of provider tax and donation schemes (which are currently limited or prohibited)
would be permitted.
From the beginning of the current Medicaid debate, the President has maintained that Medicaid must be a financed through a federal-state
partnership that ensures a reasonable and appropriate amount of funding to provide meaningful benefits to eligibles while also protecting
states from increases in enrollment. Although growth in federal expenditures for Medicaid can be slowed, any adjustments must be based
on who a state covers. An arbitrary ceiling (Block Grant) does not provide states with enough federal funds to provide coverage and
benefits in times of economic downturn or increased enrollment.
Although the NGA resolution reflects progress toward a financing structure based on enrollment, there are still some questions
that must be addressed. Many of these questions will not be answered until there is sufficient specificity to enable some assessment
of the budget implications of the NGA resolution. We should continue to work with Democratic governors to maintain their
progress on this issue.
Raising the minimum federal match rate from 50 percent to 60 percent will allow states to reduce their spending sharply over the
next seven years, and will raise the average federal share of total program costs from 57 percent to 63 percent. Recent analyses by
the Center for Budget and Policy Priorities indicate that a reduction of $85 billion in federal spending could yield additional state
cuts of $214 billion, and total federal and state reductions of $299 billion under the NGA approach.
Also, permitting the use of provider tax and donation schemes will allow states to reduce the amount of "real" state dollars which
they contribute to the program. During the late 1980s and early 1990s, many States took advantage of these schemes, costing the
federal government billions of dollars and helping drive growth rates up to well over 20 percent. The Inspector General continues
to express concerns about such financing schemes. Bipartisan legislation in 1991 closed these financial loopholes.
NGA MEDICAID PROPOSAL: PROVISIONS AND CONCERNS
4. PROVISION: Standards and Protections
Family Financial Protection
The NGA proposal contains no provision about beneficiary, spousal, and family protection.
Quality
States are required to abide by the OBRA 1987 standards for nursing home reform, but have the flexibility to decide how
nursing home standards will be enforced
Repeals and does not replace standards for ICFs/MR
Does not include quality provisions related to managed care
TOP LINE CONCERNS:
Financial
States would be able to impose a number of requirements that adult children of nursing home patients contribute to the cost of
their parents care.
States would be able to impose requirements on the at home spouse of a nursing home patient to contribute to the cost of care,
without protecting minimum levels of income and resources. (NGA may be addressing this issue)
States would not be limited in the mechanism used to establish and impose cost sharing requirements on Medicaid
beneficiaries. The same would be true for balanced billing.
Quality
The entire set of 1987 standards may not be actually maintained. (The Conference Agreement was described as maintaining all
of these standards, but in reality repealed several important ones.)
The proposal eliminates the Federal role in enforcing the standards. Federal enforcement is the key to assuring consistent
quality across states. Without the OBRA 87 enforcement rules, there could be great variations in enforcement and quality
across States.
The NGA proposal makes no mention of quality assurance requirements or monitoring responsibilities for Medicaid managed
care.
SPECIFIC CONCERNS: Standards and Protections
The NGA resolution does not address beneficiary and family financial protections such as spousal impoverishment and family
responsibility that have been central to the Medicaid program for years. (Note: the NGA may address spousal impoverishment)
Under the NGA plan adult children of nursing home patients could be required to contribute toward the cost of care of their
relative. Under current law, adult children would not be responsible for such payment.
States would have complete flexibility to impose new requirements on calculation of assets in determining eligibility; similarly new
rules for imposition of liens on family homes and farms could be implemented.
Because there is no provision addressing the imposition of cost sharing that can be imposed on Medicaid beneficiaries, states would
have great flexibility in this area. Although the President's plan would expand copayments into the managed care area, they would
still be nominal and limited to certain circumstances.
Nearly, a third of all Medicaid beneficiaries are enrolled in some form of managed care. The NGA proposal makes no mention of
quality assurance or monitoring responsibilities. The President's plan replaces outdated approaches to managed care quality
assurance and requires that states develop their own quality improvement and monitoring programs. In addition, under the
President's plan, health plans would be required to meet certain minimum requirements such as provider capacity to meet the needs
of enrollees.
NGA MEDICAID PROPOSAL: PROVISIONS AND CONCERNS
5.
PROVISION: Service Delivery, Provider Standards, and Reimbursement
States can use "all available health care delivery systems" without HCFA waivers
States have no limits on the number of beneficiaries enrolled in any one network
States have complete authority to set provider reimbursement rates (Repeal Boren)
Cost based reimbursement is phased-out over two years for FQHCs and RHCs
States set their own provider qualifications standards
States may pay Medicaid rate for QMBs
TOP LINE CONCERNS:
Beneficiaries enrolled in HMOs may have no choice of managed care plans or doctors
There are no clear protections to ensure plans have adequate capacity or quality
There would be no supplemental funding to help FQHCs and RHCs transition away from cost based reimbursement.
If states pay Medicaid rates for QMBs, then QMBs may be subject to balance billing to make up any difference in payment
rates
Hospitals and other facilities might be subject to different standards and requirements for Medicare and Medicaid
Necessary protections for Indian Health programs would be lost
MEDICAID POLICY BRIEFING
BACKGROUND MATERIALS
FEBRUARY 23, 1996
AS ADOPTED 2/6/96
RESTRUCTURING MEDICAID
PREAMBLE
For most of the last decade, health care expenditures in the United States have far
exceeded overall growth in the U.S. economy. And while medical inflation is declining public
and privately funded health care costs continue to limit the long term economic growth of the
nation. For states, the primary impact of health care costs on state budgets has been in the
Medicaid program. Annual Medicaid growth over the last decade has been well in excess of
10 percent, and in half of those years annual growth approached 20 percent Determining the
causes of such unbridled growth is difficult. However, major contributing factors include:
congressional expansions in the program, court decisions limiting the states in their ability to
consol costs, policy decisions by states maximizing federal financing of previously state-funded
health care programs, and changing demographics.
Restricting the growth of Medicaid is no easy task Medicaid is the primary source of
health care for low income pregnant women and children, persons with disabiliries, and the
elderly. This year, states and the federal government combined will spend more than $140 billion
in this program providing care to more than 28 million people. The challenge for the nation,
and Governors as the stewards of this program, is to redesign Medicaid so that health care
cosis are more effectively contained and those that truly need health care coverage continue to
gain access to that care while giving states the needed flexibility to maximize the use of these
limited health care dollars to most effectively meet the needs of low income individuals.
THE NEW PROGRAM
Within the balanced budget debate, a number of alternatives to the existing Medicaid
program have been proposed. The following outlines the nation's Governors proposal that blends
the best aspects of the current program with congressional and administration alternatives
toward achieving a streamlined and state-flexible health care system that guarantees health care
to our most needy cirizens.
Program Goals. The program is guided by four primary goals.
1. The basic health care needs of the nation's most vulnerable populations must be
guaranteed.
2 The growth in health care expendirures must be brought under control
.1.
3. States must have maximum flexibility in the design and implementation of
coss-effective systems of care.
4. States must be protected from unanticipated program costs resulting from economic
fluctuations in the business cycle, changing demographics, and natural disasters.
Eligibility. Coverage remains guaranteed for:
Pregnant women to 133 percent of poverty.
Children to age 6 to 133 percent of poverty.
Children age 6 through 12 to 100 percent of poverty.
The elderly who meet SSI income and resource standards.
Persons with disabilities as defined by the state in their state plan States will have a
funds set-aside requirement equal to 90 percent of the percentage of total medical
assistance funds paid in FY 1995 for persons with disabiliries.
Medicare COST sharing for Qualified Medicare Beneficiaries.
Either:
- Individuals or families who meet current AFDC income and resource standards
(states with income standards higher than the national average may lower those
standards to the national average); or
- States can run a single eligibility system for individuals who are eligible for a new
welfare program as defined by the state.
Consistent with the statute, adequacy of the state plan will be determined by the Secretary
of HHS. The Secretary should have a time certain to act
Coverage remains optional for:
All other optional groups in the current Medicaid program.
Other individuals or families as defined by the state but below 275 percent of poverty.
Benefits
The following benefits remain guaranteed for the guaranteed populations only.
- Inpatient and outpatient hospital services, physician services, prenatal care, nursing
facility services, home health care, family planning services and supplies, laboratory
and x-ray services, pediatric and family nurse practisioner services, nurse midwife
services, and Early and Periodic Screening, Diagnosis and Treatment Services. (The
2
"T" in EPSDT is redefined so that a state need not cover all Medicaid optional
services for children.)
At a minimum, all other benefits defined as optional under the current Medicaid
program would remain optional and long term care options significantly broadened
States have complete flexibility in defining amount, duration, and scope of services.
Private Right of Action
The following are the only rights of action for individuals or classes for eligibility. All
of these features will be designed to prevent states from having to defend against an
individual's suit on benefits in federal court.
- Before taking action in the state courts, the individual must follow a state
administrative appeals process.
- States must offer individuals or classes a private right of action in the state courts
as a condition of participation in the program.
- Following action in the state courts, an individual or class could petition the U.S.
Supreme Court
- Independent of any state judicial remedy, the Secretary of HHS could bring action
in the federal courts on behalf of individuals or classes but not for providers or
health plans.
There should be no private right of action for providers or health plans.
Service Delivery
States must be able to use all available health care delivery systems for these
populations without any special permission from the federal government.
States must not have federally imposed limits on the number of beneficiaries who may
be enrolled in any network
Provider Standards and Reimbursements
States must have complete authority to set all health plan and provider reimbursement
rates without interference from the federal government or threat of legal action of the
provider or plan
The Boren amendment and other Boren-like statutory provisions must be repealed
"One hundred percent reasonable cost reimbursement" must be phased out over a two
year period for federally qualified health centers and rural health clinics.
-3.
States must be able to set their own health plan and provider qualifications standards
and be unburdened from any federal minimum qualification standards such as those
currently set for obsterricians and pediatricians.
For the purpose of the Qualified Medicare Beneficiaries program, the states may pay
the Medicaid rate in lieu of the Medicare rate.
Nursing Home Reforms
States will abide by the OBRA '87 standards for nursing homes.
States will have the flexibility to determine enforcement strategies for nursing home
standards and will include them in their state plan
Plan Administration
States must be unburdened from the heavy hand of oversight by the Health Care
Financing Administration
The plan and plan amendment process must be streamlined to remove HCFA
micromanagement of state programs.
Oversight of state activities by the Secretary must be streamlined to assure that federal
intervention occurs only when a state fails to comply substantially with federal statutes
or its own plan
HCFA can only impose disallowances that are commensurate with the size of the
violation.
This program should be written under a new title of the Social Security Act.
Provider Taxes and Donations
Current provider tax and donation restrictions in federal statutes would be repealed.
Current and pending state disputes with HHS over provider taxes would be discontinued
Financing. Each state will have a maximum federal allocation that provides the state with the
financial capacity to cover Medicaid enrollees. The allocation is available only if the state puts
up a matching percentage (methodology to be defined). The allocation is the sum of four
factors: base allocation, growth, special grants (special grants have no state matching
requirement) and an insurance umbrella, described as follows:
1. Base In determining base expendirures, a state may choose from the following-1993
expenditures, 1994 expendirures, or 1995 expenditures. Some states may require special
provisions to correct for anomalies in their base year expenditures.
2 Growth This is a formula that accounts for estimated changes in the state's caseload
(both overall growth and case nix) and an inflation factor. The details of this
jormula are to be determined This formula is calculated each year for the following
year based on the best available data
3. Special Grants. Special grant funds will be made available for certain states to cover
illegal aliens and for certain states to assist Indian Health Service and related facilities
in the provision of health care to Native Americans. States will have no matching
requirement to gain access to these federal funds.
4. The Insurance Umbrella This insurance umbrella is designed to ensure that states
will get access to additional funds for certain populations if, because of unanticipated
consequences, the growth factor fails to accurately estimate the growth in the
population Funds are guaranteed on a per-beneficiary basis for those described below
who were not included in the estimates of the base and the growth. These funds are
an entitlement to states and not subject to annual appropriations.
Populations and Benefits, Access to the insurance umbrella is available to cover the cost
of care for both guaranteed and optional benefits. The umbrella covers all guaranteed
populations and the optional portion of two groups-persons with disabilities and the el-
derly.
Access to the Insurance Umbrella The insurance umbrella is available to a state only
after the following conditions are met
1. States must have used up other available base and growth funds that had not
been used because the estimated population in the growth and base was greater
than the actual population served
2 Appropriate provisions will be established to ensure that states do not have
access to the umbrella funds unless there is a demonstrable need
5. Matching Percentage. With the exception of the special grants, states must share in
the cost of the program. A state's matching contribution in the program will not
exceed 40 percent
6. Disproportionate Share Hospital Program. Current disproportionate share hospital
spending will be included in the base DSH funds must be spent on health care for
-5.
low income people A state will not receive growth on DSH if these funds constitute
more than 12 percent of total program expenditures.
Provision for Territories. The National Governors' Association strongly encourages Congress to
work with the Governors of Puerto Rico, Guam, and other territories towards allocating
equitable federal funding for their medical assistance pr. ---
. 6
SECURITY DEPARTMENT
THE SECRETARY OF HEALTH AND HUMAN SERVICES
WASHINGTON, D.C. 20201
USA
FEB 15 1996
MEMORANDUM FOR LAURA TYSON
From:
The Secretary Donn 98hlole
Subject:
Questions on NGA Medicaid plan
OVERVIEW
The President's stand on Medicaid throughout the budget debate has been very successful
because it is grounded in sound principles that are reinforced by his well-known personal
commitment to health care coverage. He has received a great deal of credit by insisting on a
balanced approach to Medicaid reform that:
preserves the federal guarantee of a Congressionally-defined benefit package for Medicaid
beneficiaries;
preserves Medicaid protection for currently eligible groups;
maintains our shared financial partnership with states as they provide health coverage to
needy individuals;
provides unprecedented new flexibility to states in how to operate their programs, pay
providers of care, and operate managed care and other arrangements, with continuing
programmatic and fiscal accountability, and federal savings that contribute to the balanced
budget plan.
Last week, the National Governors Association (NGA) approved the outlines of a plan that they
are now refining. The lead Democratic Governors in those negotiations worked long and hard to
convince their Republican colleagues to agree to a financing alternative to the block grant that
allows the federal funding to appear to be more responsive to enrollment changes. As the
President has indicated, those discussions and that movement on the financing structure have been
helpful.
QUESTIONS ABOUT THE NGA MEDICAID PLAN
However, as we continue to review the evolving NGA policy, it is clear that it does not meet the
principles that have served as the basis for the President's position. The attached documents
review the key issues. In brief, the governors' plan repeals title XIX, the current Medicaid
program, and replaces it with a new program that falls short of the President's principles.
Eligibility/Benefits/Enforcement
While the NGA policy retains the States' entitlement to federal funding, it repeals the existing
federal entitlement or guarantee of Congressionally-defined health benefits for Medicaid
beneficiaries. It is important to note that when we use the phrase federal "guarantee" it has a
different meaning than when others use it. For us, it means an entitlement, with three key
interrelated components - definitions of eligible groups, benefits, and enforcement. The NGA
plan provides for a "guarantee" of coverage that makes marginal improvements in the Republican
block grant, but it is only a nominal guarantee.
Eligibility. While the NGA plan includes a number of mandatory groups, it repeals the
current law phase-in of Medicaid coverage for children ages 13-18 in families with income
below the federal poverty level - repealing a coverage expansion signed into law in the
last Administration. Further, the plan repeals the federal standard for defining disability,
replacing it with state definitions - making uncertain coverage and benefits for
populations such as those with HIV; and it is unclear about guaranteed coverage of cash
assistance populations and those making the transition from welfare to work;
Benefits. While the NGA plan lists required benefits for the mandatory populations, it
provides "complete" flexibility in defining the adequacy of those benefits (amount,
duration and scope). It is silent on whether benefits must be comparable among or within
groups and areas of the state; makes an unspecified change in the currently required
treatment component of the Early and Periodic Screening, Diagnosis, and Treatment
(EPSDT) program; and sets no standard for benefits for optional beneficiary groups.
Enforcement. The NGA plan repeals the federal right of action for individuals and limits
claims that a state is violating federal law to resolution by state courts. Medicaid would be
the sole federal statute conferring no possibility of federal enforcement by its intended
beneficiaries.
Financing
The NGA plan's proposed financing may be responsive to enrollment changes -- a change that
Democratic governors have insisted on - but more details are needed. We need to continue to
work with the Democratic governors to help them assure that the plan specifics reflect the need
for a financing structure that truly adapts to enrollment changes.
Apart from gaining more details about the federal structure, the real financing problem is that the
plan could substantially lessen state contributions to health coverage under Medicaid.
The maximum state matching percentage drops from 50 percent to 40 percent. In the
context of a capped program, this could increase the total Medicaid funding cuts
2
substantially. Analyses of a comparable provision in the Republican plan indicate that an
$85 billion federal cut could yield additional state cuts of over $200 billion under this
approach. Alternatively, in an open-ended financing approach, this provision could
substantially increase federal costs, as states could capture more federal matching for the
same amount of state funds.
Moreover, the "real"state share could change because of another provision in the NGA
approach. The plan allows states to use questionable provider donation and tax provisions
without limits, like those in the late 1980s and early 1990s that significantly drove up
federal program costs and reduced actual state spending - ultimately states could take all
of their funds out of the program with these mechanisms. Bipartisan legislation in 1992
closed these financial loopholes.
The federal costs and savings of the proposal are important in the context of the President's
balanced budget plan, which includes $59 billion in federal Medicaid savings. At this point, it is
unclear whether the NGA plan will achieve federal savings of the type envisioned in the balanced
budget plan.
Quality/Beneficiary Financial Protections/Accountability
By repealing title XIX, the NGA plan repeals beneficiary financial protections, and quality and
fiscal standards that are essential components of the Medicaid program. For example:
The NGA plan does not appear to include requirements for quality standards for managed
care plans.
The NGA plan retains the Republican Conference Agreement approach of eliminating
federal enforcement of the nursing home standards.
The NGA plan is silent on beneficiary financial protections: these include spousal
impoverishment protections as well as financial protections for the adult children of aged
nursing home residents.
NEXT STEPS
The NGA took an important and logical step that reflects the legitimate interests of the governors.
The Democratic governors did a good job in moving the Republican governors in the direction of
a per enrollee financing structure. However, we should all recognize the inherent constraints on
any process driven solely by any one interest, including the governors. The majority of the
governors are Republicans who had already signed on to the block grant approach that the
President vetoed. In addition, it is difficult, if not impossible, for even our strongest Democratic
governors to argue personally with fellow governors for federal standards in many areas that have
been central to the President's position, despite the unprecedented flexibility that is already
3
offered in the President's plan.
The President's approach should continue to serve as the basis for Democratic unity on Medicaid.
As the NGA proceeds to flesh out its plan, we need to foster discussions among the Democratic
governors and members of Congress about how best to adapt the President's proposal to meet
our shared goals.
ATTACHMENTS
ENTITLEMENT: ELIGIBILITY/BENEFITS/ENFORCEMENT
FINANCING
ACCOUNTABILITY
4
ENTITLEMENT TO A MEANINGFUL BENEFIT PACKAGE
Overview
The most fundamental principle underlying the President's Medicaid reform plan is the concept
that beneficiaries are entitled to a meaningful benefit package. So long as they meet the
eligibility requirements, certain categories of individuals have an absolute and enforceable
guarantee of benefits--a guarantee upon which they can rely. There are three basic components
to the Medicaid entitlement:
-Eligibility
-Benefits
--Enforcement
Eligibility
The NGA resolution provisions on eligibility include a number of groups as "guaranteed"
eligibles, i.e., coverage is "guaranteed" for the following:
Pregnant women, and children to 133% of poverty
Children to age 6 up to 133% of poverty
Children 6-12 to 100% of poverty
The elderly who meet SSI income and resource standards
Persons with disabilities - "disability" defined by the state
Medicare cost sharing for Qualified Medicare Beneficiaries (QMBs)
Families who meet current AFDC income and resource standards; or states may run a
single eligibility system for those who are eligible for "new welfare."
Coverage is optional for the following groups:
All other current law optional groups
Other individuals or families as defined by the state but below 275% of poverty
However, the NGA resolution fails to address certain key populations.
Medicaid would no longer be phased in for children 13 - 18 under 100% of poverty as
would be the case under current law. This coverage was enacted with bipartisan support.
States can apply more limited definitions of disability than exist under federal law. This
provision could lead to severely restricted definitions of disability resulting in very
limited coverage for a population whose service needs are among the most costly. For
example, states could define disability in ways that preclude individuals with certain
diagnoses (HIV, or mental illness) from being able to receive needed services under
Medicaid. This is particularly significant because the disabled are unable to work and
therefore less likely to have other health insurance.
It is important to note current welfare reform proposals include changes in key areas in
the definition of disability to address substantive concerns raised by states and others.
-
In the case of drug addicts and alcoholics, the proposal (accepted by the
Administration) would change program eligibility to exclude drug addiction and-
alcoholism as a qualifying disability for purposes of SSI and Medicaid.
-
In the case of disabled children, effective in 1998, the proposal would change the
eligibility process by eliminating the Individual Functional Assessment (IFA)
process and eliminating maladaptive behavior from inclusion in the Social
Security Act.
Welfare related coverage is very unclear, and the NGA resolution provides insufficient
information about the links between new welfare definitions and Medicaid coverage.
Benefits
The NGA resolution includes the following list of benefits that are "guaranteed" but only for
"guaranteed" coverage groups.
--Inpatient and outpatient hospital
-Physician
--prenatal care
--nursing facility
--home health
--family planning and supplies
--laboratory and x-ray
--pediatric and family nurse practitioner
--nurse midwife
--EPSDT, with limitations on requirements for treatment
The resolution stipulates that all other services would be optional, and there would be a
broadened long term care benefit.
Even given the apparent progress made in defining a mandatory benefit package, there are still
serious concerns with the provisions of the NGA resolution.
A responsible health care program must provide benefits that are adequate to achieve
their purpose. Under the NGA resolution, states would be given complete flexibility to
define the amount, duration and scope of the benefits to be provided. These provisions
taken as a whole raise serious concerns about whether the Secretary would have any
ability, in the case of over-restrictive state plans, to disapprove a benefit package that
would be effectively meaningless.
2
Because the NGA resolution is silent about requirements for comparable services for all
eligible groups, or provision of services on a statewide basis, there is concern that states
might structure benefit packages that are more limited for more costly populations, (e.g.,
the disabled), or might provide less comprehensive services in certain parts of the state.
There are serious questions about the equity that might result under the NGA approach.
The NGA would limit the treatment option under EPSDT in a manner that is still unclear.
The Administration has indicated a willingness to discuss additional flexibility-offering
optional benefits to optional beneficiaries in the context of the President's plan.
Enforcement
The third essential component of the entitlement is enforcement. The NGA resolution contains
provisions requiring states to provide a guaranteed state right of action, but eliminates any
federal right of action for individuals and providers. The only access to federal court would be
the opportunity to petition the U.S. Supreme Court for review from a decision of state's highest
court. The NGA provisions pose a number of serious questions and concerns.
Implicit in the concept of defined populations and defined benefits is the back-up of a
meaningful enforcement mechanism. A federal cause of action for beneficiaries assures
that those seeking a remedy for the deprivation of medical care receive the same due
process rights everywhere in the United States.
Under the NGA proposal, Medicaid would be the single federal statute conferring no
possibility of federal enforcement by its intended beneficiaries; seeking enforcement of
title XIX would be the one cause of action arising under federal law that would be barred
from the federal courts. Such an unprecedented step would be seen by important
constituencies as a signal of second-class status and would set off massive reaction from
beneficiary groups and their allies. Advocates for the poor would be restricted to the
remedies and procedures available under state law, which are often stricter than those
under federal law.
The largest number of suits against states have been filed by providers over payment
rates. Under the administration's plan, the Boren Amendment would be repealed, thereby
eliminating these causes of action by providers. Going further, the Administration has
indicated a willingness to specify that there would be no right of action by providers over
payment rates under statutory provisions other than the Boren Amendment. Thus, under
the Administration's plan, state concerns about limiting their exposure to suit in federal
court would be largely resolved. Given the broader federal policy and the reality that
beneficiary suits have not been a problem, further changes to individual right of action
would appear to be unnecessary.
3
Those aspects of the Medicaid program that are common to all states should be subject to
consistent interpretation and administration. Efficiency and predictability are best served
by using the federal court system, when the same question arises across multiple
jurisdictions. Moreover, when Medicaid-based claims interact, as they often do, with
other areas of federal law (Medicare, Social Security), the federal courts are more
experienced in analyzing these statutory relationships and are better able to understand
and decide cases with potentially broad ramifications.
There is no indication that federal judges-the vast majority of whom were appointed by
Republican presidents-ignore or take lightly the legitimate concerns of state
administrators.
4
FINANCING
The National Governors' Association resolution would replace the current financing system with
a combination of a fixed federal payment, and a payment adjustment for unexpected excess
enrollment. The minimum federal contribution to the financing of Medicaid would increase from
50 percent to 60 percent, and states' use of provider tax and donation schemes (which are
currently prohibited) would be permitted.
From the beginning of the current Medicaid debate, the President has maintained that Medicaid
must be a financed through a federal-state partnership that ensures a reasonable and appropriate
amount of funding to provide meaningful benefits to eligibles while also protecting states from
increases in enrollment. Although growth in federal expenditures for Medicaid can be slowed,
any adjustments must be based on who a state covers, not an arbitrary ceiling (Block Grant) that
does not provide states with enough federal funds to provide coverage and benefits in times of
economic downturn or increased enrollment.
Although the NGA resolution reflects progress toward a financing structure based on
enrollment, there are still some questions that must be addressed. Many of these
questions will not be answered until there is sufficient specificity to enable some
assessment of the budget implications of the NGA resolution. We should continue to
work with Democratic governors to maintain their progress on this issue.
Raising the minimum federal match rate from 50 percent to 60 percent will allow states to
reduce their spending by over $200 billion over the next seven years, and will raise the
average federal share of total program costs from 57 percent to 63 percent.
Also, permitting the use of provider tax and donation schemes will allow states to reduce
the amount of "real" state dollars which they contribute to the program. During the late
1980s and early 1990s, many States took advantage of these schemes, costing the federal
government billions of dollars and helping drive growth rates up to well over 20 percent.
The Inspector General continues to express concerns about such financing schemes.
5
ACCOUNTABILITY
The President's plan proposes unprecedented new flexibility for the states in how to operate their
programs, pay providers, and use managed care and other delivery arrangements. At the same
time, it retains core standards related to quality and beneficiary financial protections.
The NGA resolution would repeal title XIX and create a new title for the Medicaid program.
This has the de facto effect of compromising seriously the existing framework for accountability
that provides governance for the Medicaid program today. The NGA resolution is silent in many
areas that affect Medicaid reform. And in areas where the resolution is specific, some long-
standing protections would be reduced or eliminated.
The NGA resolution eliminates the federal role in monitoring nursing home quality
assurance--yet without federal monitoring and enforcement of state and facility
compliance, the uniform quality standards established by OBRA 87 are meaningless.
Nearly a third of all Medicaid beneficiaries are currently enrolled in some form of
managed care. The NGA resolution makes no mention of quality assurance requirements
or monitoring responsibilities for Medicaid managed care.
The NGA resolution does not address beneficiary and family financial protections such as
spousal impoverishment and family responsibility that have been central to the Medicaid
program for years. These protections are maintained in the President's plan. The NGA
resolution also does not address the imposition of copayments and other cost sharing for
Medicaid beneficiaries.
There are ways, similar to the approach taken in the President's plan, to provide states
with considerably expanded flexibility in management and operation of their Medicaid
programs, without reducing the framework of responsible accountability to
meaninglessness. There must be at least a modicum of reporting requirements and
monitoring in a program that spends over $100 billion federal dollars. The NGA
resolution expands federal funding and reduces ongoing congressional and executive
management of the program.
6
2-16-96
COMPARISON OF MEDICAID PLANS
ISSUES
MEDIGRANT II
NATIONAL GOVERNORS ASSOCIATION
ADMINISTRATION
COALITION
BLOCK GRANT
Like MediGrant n
Like Administration
PER CAPITA CAP
PER CAPITA CAP
STRUCTURE
Block grant
Block grant and insurance
Per capita cap and DSH reductions.
Per capita cap and DSH reductions.
umbrella for unexpected excess
enrollment
New title of Social Security Act
New title of Social Security Act
Retain title XIX
Retain title XIX
ELIGIBILITY
Coverage "guaranteed" for:
Coverage is "guaranteed" for:
Maintains all current law mandatory
Maintains all current law mandatory
and optional groups, including:
and optional groups, including:
-Pregnant women, and children
- Pregnant women, and children
under 6 under 133% of poverty
under 133% of poverty
- Pregnant women and children
- Pregnant women and children
-Children 6-12 under 100% of
- Children 6-12 under 100 %
age 1-6 under 133% of poverty
age 1-6 under 133% of poverty
poverty
of poverty
- Children age 6 through 12 under
- Children age 6 through 12
-People with disabilities (as
- Persons with disabilities (as
100 % of poverty
under 100 % of poverty
defined by the state) who meet
defined by the state)
- Children age 12-18 under 100%
- Children age 12-18 under 100%
SSI standards
- Medicare cost sharing for
of poverty to be phased in so that
of poverty to be phased in so
-Elderly who meet SSI income
Qualified Medicare
by year 2002, all children up to age
that by year 2002, all children
and resource standards.
Beneficiaries (QMBs)
18 will be covered
up to age 18 will be covered
- Elderly who meet SSI income
- AFDC cash recipients,
- AFDC cash recipients,
and resource standards
- SSI Aged, Blind, and Disabled
- SSI Aged, Blind, and Disabled
- Families who meet current
- QMBs
- QMBs
AFDC income and resource
standards, or eligibles for "new
welfare".
All other eligibility groups
Coverage is optional for: all
- All current law optional groups,
- All current law optional groups,
would be optional. States may
other optional groups as defined
including the Medically Needy
including the Medically Needy
cover individuals up to 275% of
by the current law, and other
poverty
individuals or families as
Also adds a new eligibility option
Also adds a new eligibility option
defined by the state but below
for individuals below 150% of
for individuals below 150% of
275% of poverty.
poverty, subject to a budget neutrality
poverty, subject to a budget
requirement.
neutrality requirement.
ISSUES
MEDIGRANT II
NATIONAL GOVERNORS ASSOCIATION
ADMINISTRATION
COALITION
BLOCK GRANT
Like MediGrant II
Like Administration
PER CAPITA CAP
PER CAPITA CAP
BENEFITS
"Guaranteed" for low income
Does not require FQHC and
"Guaranteed" coverage for
Retains current law requiring States
Retains current law requiring States
families: Inpatient/outpatient
RHC services.
mandatory populations:
to cover: inpatient and outpatient
to cover: inpatient hospital,
hospital, physicians' surgical
inpatient/outpatient, laboratory
hospital, RHC & FQHC services,
outpatient hospital, RHC & FQHC
and medical services,
and x-ray services, nurse
laboratory and x-ray services, nurse
services, laboratory and x-ray
Diagnostic tests, Childhood
practitioners' services, nursing
practitioners' services, nursing
services, nurse practitioners' services,
immunizations, and pre-
facility and home health
facility and home health services,
nursing facility and home health
pregnancy planning services
services, EPSDT*, family
EPSDT, family planning services and
services, EPSDT, family planning
and supplies.
planning services and supplies,
supplies, physicians' services, nurse-
services and supplies, physicians'
physicians' services, nurse-
midwife services.
services, nurse-midwife services.
midwife services.
Long term care services for the
*See EPSDT below under
elderly and disabled
"Like MediGrant II"
States are not required to
All currently optional services
States may also cover optional
States may also cover optional
provide any other services.
would remain optional
services (drugs, physical therapy,
services (drugs, physical therapy,
dental services, etc.)
dental services, etc.)
Amount, Duration,
Eliminates requirements
"Complete" State flexibility
Retains current state flexibility within
Retains current state flexibility
and Scope
comparability and statewideness
within comparability and
requirements
statewideness requirements
EPSDT
No specific requirement for
Unclear : "redefines" treatment
Retains current law for treatment
Changes treatment: The Secretary,
early, periodic, screening,
- no specifics how it will be
mandating coverage of services to
after consultation with States and
diagnosis and treatment
redefined.
treat or ameliorate a defect, physical
provider organizations, would define
services (EPDST) for children
and mental illness, or condition
treatment under EPSDT.
under age 21.
identified by a health screen.
Comparability
Eliminates requirements
No provision
No provision
Retains current law requirement that
Retains current law requirement that
Statewideness
services be comparable and available
services be comparable and available
statewide
statewide
Vaccines for
Eliminated
No provision
No provision
Maintained
Maintained
Children Program
Home and
Optional service, states no
Unclear - proposal "broadens"
Unclear - proposal
Makes home and community-based
Current law
Community-Based
longer needs waiver to provide
long-term "options." No
"broadens" long-term
services an optional service - States
Services
specifics how options are
"options." No specifics
no longer need waivers to cover these
broadened.
how options are broadened
services.
2
ISSUES
MEDIGRANT II
NATIONAL GOVERNORS ASSOCIATION
ADMINISTRATION
COALITION
BLOCK GRANT
Like MediGrant II
Like Administration
PER CAPITA CAP
PER CAPITA CAP
RIGHT OF
No federal right of action for
No federal right of action for
Maintains current law individual right
Maintains current law individual
ACTION
individuals or providers
individuals or providers.
of action for individuals to bring suit
right of action for individuals to
in federal court.
bring suit in federal court.
Silent on state court right of
States must provide state court
action
right of action
Individuals can bring issues
Must use state administrative
and/or complaints to the
mechanisms before going to
attention of the Secretary
state court
Secretary's action re individual
Can petition US Supreme Court
complaints is limited to
for review after all state court
investigation and subsequent
action completed
notification to the Congress
and/or chief executive of the
Secretary can bring suit in
state
federal court on behalf of
individuals or classes.
FAMILY
Allows states to require adult
No provision
No provision
Retains current law prohibiting states
Retains current law prohibiting states
PROTECTIONS
children of nursing home
from presuming that relatives other
from presuming that relatives other
residents with incomes above
than spouses will provide financial
than spouses will provide financial
the state median income to
support.
support.
contribute to their parents'
nursing home care.
Spousal
Retains current law
No provision
No provision
Retains current law
Retains current law
Impoverishment
Copayments
States have broad flexibility to
No provision
No provision
Maintains current limitations that
Allows States to impose copayments
develop cost sharing schedules
copayments be nominal and only for
scaled to income and family size for
that differentiate between
some individuals/benefits. New
individuals/benefits currently subject
income groups, types of
authority to impose similar nominal
to copayments.
services. Greater restrictions on
copayments on HMO enrollees.
cost sharing for children and
pregnant women.
3
ISSUES
MEDIGRANT II
NATIONAL GOVERNORS ASSOCIATION
ADMINISTRATION
COALITION
BLOCK GRANT
Like MediGrant II
Like Administration
PER CAPITA CAP
PER CAPITA CAP
FINANCING
Fixed federal payments set by
Partially fixed: For base
Partially responsive: An
Responsive: Federal benefit
Responsive: Federal benefit
formula: Federal spending will
spending, Federal payments are
"Insurance Umbrella" allows
spending limits are based on
spending limits are based on
Federal Spending
be $839 billion between 1996-
set by a formula. A state gets
for higher Federal payments
enrollment growth. The limits
enrollment growth. The limits
Limit
2002 (savings of $85 billion).
this amount even if it reduces
when enrollment for
increase and decrease with changes in
increase and decrease with changes
benefits or enrollment. Federal
mandatory and some optional
enrollment growth. DSH payments
in enrollment growth. DSH
spending and savings are not
groups is unexpectedly high.
are fixed. Estimated Federal
payments are fixed. Estimated
known.
Federal spending and savings
spending of $865 billion between
Federal spending of $839 billion
are not known.
1996-2002 (savings of $59 billion).
between 1996-2002 (savings of $85
billion).
State Spending
State matching rates are
State matching rates are
Current matching rates are
Current matching rates are
significantly lowered.
significantly lowered.
maintained.
maintained.
Estimated state spending over
State spending and savings are
Estimated state spending over seven
Estimated state spending over seven
seven years: $493 billion
not known.
years: $653 billion (savings of $45
years: $633 billion (savings of $65
(savings of $205 billion).
billion).
billion).
Provider taxes and donations
Provider taxes and donations
Current restrictions on the use of
Current restrictions on the use of
restrictions are repealed,
restrictions are repealed,
provider taxes and donations are
provider taxes and donations are
allowing states to "borrow"
allowing states to "borrow"
retained.
retained.
money from providers to
money from providers to
replace state tax dollars.
replace state tax dollars.
1996 allotments are set in
Base funding is set by
The "Insurance Umbrella"
Federal benefit spending limits are
Federal benefit spending limits are
Funding Formula
legislation. Subsequent years'
multiplying the base year - the
allows states to get Federally-
calculated by multiplying the states'
calculated by multiplying the states'
allotments are based on the
states' choice of 1993, 1994, or
matched capitation payments
enrollment by a spending limit per
enrollment by a spending limit per
product of the number of poor
1995 spending -- by an
for mandatory and some
beneficiary (product of the average
beneficiary. The spending limit per
people and the state-adjusted
inflation factor and estimated
optional beneficiaries who are
1995 spending by beneficiary group
beneficiary is the product of a rolling
spending per person, subject to
enrollment growth. DSH
above the estimated
and nominal GDP growth per person
average spending by beneficiary
maximum or minimum growth
spending is included in the base,
enrollment for the year.
(5-year average) plus an adjustment
group and CPI (3-year average) plus
rates. Actual enrollment is not
but is not grown if DSH is
factor). The group-specific limits are
adjustment factors. The group-
included in the formula.
greater than 12%,of total
summed so that each state has one,
specific limits are summed so that
spending.
enrollment-based limit that is
each state has one, enrollment-based
matchable by the Federal
limit that is matchable by the Federal
government. The DSH limits, which
government. The DSH limits, which
are gradually phased in, are based on
are gradually phased in, are based on
states' share of the number of low-
states' share of the number of low-
income patient days.
income patient days.
4
ISSUES
MEDIGRANT II
NATIONAL GOVERNORS ASSOCIATION
ADMINISTRATION
COALITION
BLOCK GRANT
Like MediGrant II
Like Administration
PER CAPITA CAP
PER CAPITA CAP
PROVIDER
Repeals all provider payment
Repeals all provider payment
Repeals Boren Amendment
Repeals Federal payment rules for
Retains current federal payment
rules - hospitals, nursing
rules.
PAYMENTS,
hospitals, nursing facilities, FQHCs
rules.
homes, hospice, FQHC/RHC
and RHCs (except for Indian
PROGRAM
and home and community-based
FQHCs/RHCs) and home and
OPERATION,
services.
community-based services.
AND
Repeals requirement that rates
Unclear. May repeal
Retains current requirement that rates
Retains current requirement that rates
SERVICE
be sufficient to guarantee access
requirement that rates be
be sufficient to guarantee access to
be sufficient to guarantee access to
DELIVERY
to services.
sufficient to guarantee access to
services.
services.
services.
Repeals payment rules for
Repeals payment rules for
Repeals payment rules for obstetrical
No change to payment rules for
obstetrical and pediatric care
obstetrical and pediatric care
and pediatric care
obstetrical and pediatric care
Special Provider
Repeals physician qualification
Repeals physician qualification
Repeals physician
Repeals physician qualification
Retains physician qualification
Qualifications
requirements.
requirements.
qualification requirements.
requirements.
requirements.
Managed Care
States' ability to mandate
States may implement managed
States may implement
States could mandate enrollment in
States could mandate enrollment in
managed care enrollment would
care without a waiver
managed care without a waiver
managed care, except:
managed care, except:
be unrestricted.
Beneficiaries would have no
Unclear. Beneficiaries may
Unclear. Beneficiaries may be
Beneficiaries must have a choice
-Beneficiaries must have a
guarantee of choice of plan or
have no guarantee of choice of
guaranteed a choice of plan or
of plan or delivery system;
choice of plan or provider;
provider.
plan or provider.
provider.
States may not require enrollment
-States may not require special
for Medicare cost-sharing;
needs individuals to enroll in
managed care plans.
States may not restrict choice of
provider for family planning services.
Payments to managed care plans
No provision
No provision
Retains current law - payments to
Applies the current "reasonable and
must be based on actuarial
managed care plans must be
adequate" payment standard to
methods
actuarially sound.
managed care systems.
Contracting
Repeals all statutory contracting
Unclear. May repeal all
Unclear. May retain some
Repeals problematic contracting
Repeals current contracting rules.
and Solvency
rules.
contracting rules.
current contracting rules.
rules: 75/25 rule; HHS approval of
HMO contracts; payment rules for
managed care-contracting FQHCs.
Health plans must meet
No provision
No provision
Provides new authority for solvency
Establishes new solvency standards.
commercial solvency standards.
standards.
5
ISSUES
MEDIGRANT II
NATIONAL GOVERNORS ASSOCIATION
ADMINISTRATION
COALITION
BLOCK GRANT
Like MediGrant II
Like Administration
PER CAPITA CAP
PER CAPITA CAP
Managed Care
No quality requirements for
Unclear
Unclear
Requires States to develop quality
Establishes new quality requirements
Quality
States or managed care plans.
improvement programs, which must
for managed care systems, including
include access standards and
statutory guarantees of accessibility
monitoring activities. Establishes
and timeliness of services,
new reporting and fraud prevention
information-sharing requirements,
requirements for health plans.
prior authorization and grievance
procedures, and encounter data.
Nursing Home
"Retains" current rules, but
Unclear. May eliminate some
Retains current nursing home
Retains current nursing home
Quality
actually eliminates significant
current standards, like
standards and enforcement.
standards and enforcement.
quality standards and
MediGrant II.
protections for nursing home
residents.
Significantly diminishes Federal
States may decide how nursing
authority to enforce quality
home standards will be enforced
standards.
Administration
Federal administrative oversight
Disallowances must be
Repeals and revises various
No change to current administrative
curtailed. Financial penalties
proportional to violation.
administrative and systems
requirements.
would be proportional and
Federal oversight limited and
requirements.
permitted only for "substantial"
intervention permitted only
violations.
when State "fails substantially"
to comply with law or program.
6
PRESIDENT CLINTON'S MEDICAID PLAN:
SUMMARY OF MAJOR PROVISIONS
February 23, 1996
THE PRESIDENT'S MEDICAID REFORM PROPOSAL
1.
Overview
2.
Financing
Responsive and Responsible Federal Financing
Per Capita Cap: What Is It
Per Capita Cap: How Does It Work and Adapt to Enrollment Changes
Per Capita Cap: Adapting to State Spending
Disproportionate Share Hospital (DSH) Changes and Pool Payments
3.
Flexibility
Provider Payment Flexibility
Managed Care Flexibility
Eligibility and Benefits Flexibility
Administrative Flexibility
1. OVERVIEW
The President's Medicaid proposal achieves significant reform and offers:
Responsive and responsible Federal funding:
Federal funding is not fixed but responds to unexpected costs due to recessions or increases in the number of aged or
disabled beneficiaries.
Federal reductions are responsible, providing states with sufficient funds to maintain coverage for the millions of
Americans who rely on Medicaid.
State flexibility: The top concerns of the Governors have been addressed, including:
Repeal of the Boren Amendment regulating provider payments;
End to the burdensome waiver process for managed care and home and community-based waivers;
Eligibility simplification and expansions without waivers; and
Elimination of many unnecessary and duplicative administrative requirements.
2
2. FINANCING
The President has proposed to reform Medicaid financing through a Per Capita Cap and Disproportionate Share Hospital (DSH)
payment changes.
Responsiveness: A per capita cap maintains the responsiveness of Federal funding to states' unexpected costs.
Under the President's proposal, the Federal government shares in the unexpected costs due to recessions or increases in
the number of aged or disabled beneficiaries.
Responsible: The per capita cap and Disproportionate Share Hospital payment reductions achieve responsible levels of Federal
savings.
The President's proposal provides states with sufficient Federal funds to maintain coverage for the millions of
Americans who rely on Medicaid.
The following section reviews:
Responsive and Responsible Federal Financing
Per Capita Cap: What Is It
Per Capita Cap: How Does It Work and Adapt to Enrollment Changes
Per Capita Cap: Adapting to State Spending
Disproportionate Share Hospital (DSH) Changes and Pool Payments
3
Responsive and Responsible Federal Financing
The President's proposal maintains the Federal commitment to share in states' Medicaid costs:
Protection from recession. During a period of economic recession, enrollment will increase, causing state costs to rise. The
Center on Budget and Policy Priorities estimates that Medicaid costs could increase by at least $26 billion over seven years if
there is a recession similar to the one experienced in the early 1980s. Under a per capita cap, the Federal government shares in
these unexpected costs.
Protection from changes in Medicaid caseload. States may find themselves with greater proportions of costly persons such as
seniors or people with disabilities. The per capita cap adapts to shifts in the types of beneficiaries covered by a state,
increasing Federal payments to states if their patient population becomes sicker.
The President's proposal also takes a responsible and not a radical amount of savings from the Medicaid program.
President's plan saves the Federal government $59 billion over seven years.
Republicans' plan saves the Federal government $85 billion over seven years.
This is $26 billion -- or 44 percent -- higher than the savings proposed by the President.
Under the Republican plan, spending growth per berleficiary would be significantly below private spending growth per
person (7 percent).
By 2002, Federal funding to states will be inadequate and states will be forced to reduce payments, benefits and deny
coverage for millions of Americans.
4
Per Capita Cap: What Is It
A "per capita cap" is a policy that limits Federal Medicaid spending growth per beneficiary. Under this policy, Federal
payments automatically adjust to a state's enrollment: if a state has an unexpected increase in enrollment, the Federal
government will share in these increased costs. In other words, Federal money will flow with the number of needy persons a
state serves.
There are three components to the per capita limit on Federal funding:
Base spending: Each state's 1995 spending per beneficiary is calculated, excluding spending items such as payments
for Medicare premiums and cost-sharing and Disproportionate Share Hospital payments. The spending per beneficiary
is separated for the four major groups of Medicaid beheficiaries: seniors, people with disabilities, adults and children.
Index: Future year spending limits will be calculated by growing the average 1995 spending per beneficiary by a pre-
set "index". The index updates the 1995 spending in proportion to the growth in the gross domestic product per person.
Actual enrollment: This indexed spending per beneficiary is then multiplied by the number of beneficiaries in each
category in a given year. The category-specific limits are then added together to yields the maximum spending that the
Federal government will match.
Each state will have a single total limit, so it can use savings from one group to support expenditures for other groups or to
expand benefits or coverage.
5
Per Capita Cap: How Does It Work and Adapt to Enrollment Changes
To give an example of how the formula works, take a hypothetical state:
1995 Spending per
2000 Limit per
Enrollment in 2000
Total Limit
Federal Limit
Beneficiary
Beneficiary *
(Millions)
(Millions)**
Elderly
$9,000
$11,487
1,000
$11.5
Disabled
$8,000
$10,210
2,000
$20.4
Adults
$2,000
$2,553
3,000
$7.7
Children
$1,000
$1,276
6,000
$7.7
Total
$47.2
$23.6
Index is 5% per year, or 28% growth between 1995 and 2000.
Assumes that the Federal medical assistance rate is 50%.
In the year 2000, the maximum Federal matching payments for this state would be $23.6 million.
The cap adapts automatically to state enrollment changes
If enrollment in these categories increases above the levels noted above, the total and Federal limit would increase
automatically -- because the limit is calculated on a per person basis.
If enrollment shifts to more expensive populations or enrollment grows faster than expected, then the total limit would increase
automatically.
o
For example, if there are 500 more seniors than noted above, then the total limit would increase by $5.7 million (500
seniors times $11,487 limit per senior), and the Federal limit would increase by around $2.85 million.
6
Per Capita Cap: Adapting to State Spending
If the state keeps spending per beneficiary below the limit for one or more categories of beneficiary, it has a number of options.
For example, assume that the state kept spending for the elderly to $10,376 per elderly beneficiary ($1,000 below the limit per
beneficiary). That would free up $1 million within the state's aggregate limit ($1,000 per enrollee times 1,000 seniors). The
state could:
Spend above its per beneficiary limit for another group. For example, the state could spend $150 more per child -- a
total of $1,426 per child -- for a total cost of $0.9 million ($150 per child times 6,000 children) and still remain within
its aggregate limit.
Use the funds to expand eligibility to new groups whose income is within the 150 percent of poverty level (see
Eligibility Flexibility).
Save the state share of the funds.
7
Disproportionate Share Hospital (DSH) Changes and Pool Payments
Disproportionate Share Hospital Payments Changes:
Disproportionate Share Hospital (DSH) payments would be reduced and retargeted.
Financing: The current (1995) Federal payments to states would be gradually phased out, and a new DSH payment
method would be phased in. Funding from a fixed Federal pool would be allotted to states on the basis of their share of
low-income days for eligible hospitals.
Program Design: States would use the funds for hospitals that serve a high number of uninsured and Medicaid patients,
and would have the flexibility to cover additional hospitals that they deem needy.
Pool Payments:
Special transition pools would would be created to ease the transition to the reformed Medicaid program.
Undocumented Persons Pool: A special pool to help the 15 states with the largest numbers of undocumented persons
would be created. This 100 percent Federal pool would be in effect from 1997 to 2001, and would be allocated to states
in proportion to their share of the nation's undocumented persons. It would be used by states for emergency care for
these persons.
Federally Qualified Health Centers and Rural Health Clinics Pool: As part of the proposed changes to promote
state flexibility, the mandate for states to pay Federally Qualified Health Centers (FQHCs) and Rural Health Clinics
(RHCs) on a cost basis would be repealed. To ease the change in funding for these facilities, a program would be
created with $500 million in Federal funds in each year beginning in 1997.
Transition Pools: Additional federal funds would be allocated through special pools designed to ease the transition to
the new program and allow states to plan now for program changes.
8
3. FLEXIBILITY
The President's Medicaid proposal significantly increases states' flexibility to design and managed their own Medicaid programs.
The President's plan addresses the top concerns of the Governors:
Repeal of the Boren Amendment regulating provider payments;
End to the burdensome waiver process for managed care and home- and community-based waivers;
Eligibility simplification and expansions without waivers; and
Elimination of many unnecessary and duplicative administrative requirements.
The following section describes new state flexibility in the following areas:
Provider Payment Flexibility
Managed Care Flexibility
Eligibility and Benefits Flexibility
Administrative Flexibility
9
Provider Payment Flexibility
The President's plan gives states greater flexibility in setting provider payment rates:
Boren Amendment is Repealed: (NGA Recommendation) The proposal repeals the Boren Amendment, allowing states
greater discretion in establishing their provider payment rates. Under the Boren Amendment, states were required states to pay
hospitals and nursing homes "adequate" and "reasonable" rates. Because of its ambiguity, this requirement led to many costly
lawsuits for states.
Cost-Based Reimbursement for Clinics is Repealed: (NGA Recommendation) States will no longer be required to pay
Federally Qualified Health Centers (FQHCs) and Rural Health Clinics (RHCs) that are not Indian Health Service facilities on
a cost basis beginning in FY 1999.
Burdensome Standards for Obstetrician and Pediatrician Payments are Eliminated: (NGA Recommendation) States
currently must file extensive documentation relating to their payments for these providers. Under the proposal, states could set
their own payment standards for obstetricians and pediatricians and would be freed from the paperwork burden that can range
from 30 pages to 300 pages.
Requirement to Pay for Private Insurance When Cost Effective is Repealed: (NGA Recommendation) Under current
law, states are required to enroll individuals in private insurance in certain situations, when private insurance is more cost
effective. States will have the option to continue purchasing group insurance and negotiate their own rates.
10
Managed Care Flexibility
Under the President's proposal, states will have new flexibility to implement and operate Medicaid managed care programs.
Elimination of Need for a Waiver: (NGA Recommendation) States will be able to implement managed care programs
without the need for Federal waivers, so long as beneficiaries have a choice of plans, except in rural areas. States will be
permitted to enroll Medicaid beneficiaries into their health plans for up to six months and to guarantee Medicaid eligibility
during this enrollment period.
Outdated Quality Standards are Repealed: (NGA Recommendation) The 75/25 enrollment composition rule will be
eliminated.
Quality of care will be assured through state-designed quality improvement programs -- which follow Federal guidelines -- that
ensure that managed care providers maintain reasonable access to quality health care.
Federal Contract Review is Eliminated: The Federal government will no longer review states' contracts with managed care
plans that exceed $100,000.
HMO Copayments are Allowed: (NGA Recommendation) States will be able to require HMO enrollees to make nominal
copayments, consistent with their ability to require copayments in fee-for-service settings.
11
Eligibility and Benefits Flexibility
The President's proposal maintains the Federal entitlement and keeps Medicaid basic benefits intact. It builds upon this base to offer
states options for simplifying and expanding eligibility and designing community-based long-term care programs.
Eligibility Expansions are Allowed Without Waivers: If states are able to manage costs below their per capita limits, they
may add any new eligibility group at their discretion. This means that if states want to expand coverage, they may do so
without a waiver and to any group of low-income people. The only limits on this flexibility are that the new beneficiaries'
income is less than 150 percent of the poverty level, and the expansion does not result in spending above the per capita limit.
In the example of the how a per capita cap would work, the state could, under one scenario, spend $1,000 less than its
limit per senior ($10,476). With 1,000 senior enrollees, that would free up $1 million within the state's aggregate limit
($1,000 per enrollee times 1,000 senior enrollees).
With this $1 million, the state could choose to add 500 individuals with spending of $2,000 per person and still be
within their limit.
Eligibility Expansions can be Scaled Back: (NGA Recommendation) Under current law, a state that chooses to cover
pregnant women and children above the mandatory levels cannot reverse that decision. This mandate is repealed, so states can
return to the minimum level.
Home and Community-Based Care Programs are Allowed Without Waivers: (NGA Recommendation) States will be
able to provide home and community-based services to their elderly and disabled Medicaid enrollees without the
administrative burden of seeking Federal waivers.
12
Administrative Flexibility
The President's plan repeals and simplifies Federal administrative requirements for the Medicaid program.
Certain Personnel and Program Requirements are Repealed: The current Federal mandates to document the
establishment and maintenance of merit-based personnel standards, and to use professional medical personnel in administration
and supervision, are duplicative and are repealed. Also repealed is the obligation to enter into cooperative agreements with
other state agencies.
Data Requirements are Streamlined: Medicaid Management Information System (MMIS) requirements for the use of
standardized claims formats and standardized HCFA reporting requirements will be simplified and reduced. The Medicaid
Eligibility Quality Control (MEQC) system will also be reformed. States will no longer have to go through the entire
determination, adjudication, and cost accounting process every six months.
Nursing Home Resident Duplicative Reviews are Eliminated: (NGA Recommendation) Required annual resident review
in nursing homes will be repealed. States will conduct reviews when indicated.
Permissible Sites for Nurse-Aide Training are Broadened: (NGA Recommendation) States will be able to conduct nurse-
aide training in certain rural nursing homes, which currently are not considered permissible training sites.
Certain Federal Provider Qualifications Requirements are Repealed: (NGA Recommendation) Special minimum
qualifications for obstetricians and pediatricians will be repealed.
13
PRESIDENT CLINTON'S MEDICAID PLAN:
EXAMPLES OF FLEXIBILITY FOR STATES
February 23, 1996
EXAMPLES OF FLEXIBILITY IN PRESIDENT CLINTON'S
PER CAPITA CAP MEDICAID PLAN
OVERVIEW
L
IMPLEMENTING MANAGED CARE
Repeal of Requirement for Federal Waivers for Managed Care
Repeal of Managed Care Contracting Rules
Elimination of Requirement for Federal Review of HMO Contracts over $100,000
II.
FLEXIBILITY IN PROGRAM PAYMENT
Repeal of the Boren Amendment
Elimination of Special Requirements for Obstetricians and Pediatricians
III.
FLEXIBILITY IN PROGRAM BENEFITS
Elimination of Requirement for Federal Waivers for Home and Community-Based Waivers
Enabling States to Require Nominal Copayments for HMO Enrollees
IV.
FLEXIBILITY IN PROGRAM ELIGIBILITY
Income Levels for Infants and Pregnant Women
V.
FLEXIBILITY IN STATE ADMINISTRATION
Reforming Medicaid Eligibility Quality Control (MEQC)
Revise and Simplify Medicaid Management Information System Requirements
Provider Qualifications for Obstetricians and Pediatricians
Elimination of Requirements to Pay for Private Health Insurance
Elimination of Personnel Requirements
Elimination of Requirements for Cooperative Agreements
Elimination of Requirements for Preadmission Screening and Annual Resident Review (PASARR)
EXAMPLES OF STATE FLEXIBILITY IN PRESIDENT CLINTON'S
PER CAPITA CAP MEDICAID PROPOSAL
I.
IMPLEMENTING MANAGED CARE
REPEAL OF REQUIREMENT FOR FEDERAL WAIVERS FOR MANAGED CARE
Administration Proposal:
The Administration's proposal would allow states to implement managed care programs without the need for Federal waivers. States
could implement managed care programs with a state plan amendment.
43 States will no longer need to apply for waivers or waiver renewals. These States have initiated 162 requests -- either initial
waivers or renewals -- over the last three years.
States can implement managed care by submitting state plan amendments.
This simplified process will save states the considerable administrative burden associated with preparing freedom-of-choice
waiver requests.
Background:
Currently, states must apply for Federal waiver approval to implement Medicaid managed care programs. Waiver requests are
administratively burdensome and repetitive -- freedom-of-choice waivers must be renewed every two years. States generally spend
three to six months preparing freedom-of-choice waiver requests, although this effort varies widely depending on the scope and
complexity of the program. All but five states with freedom of choice waivers have more than one such waiver, each of which
requires separate processing. HCFA's review and approval process must be completed within 90 days; however, this time period may
be extended substantially if the State must provide additional information. See attached table for affected states.
FREEDOM OF CHOICE WAIVER ACTIVITY
(1993-1996)
State
1915(b) Freedom of
State
1915(b) Freedom of
State
1915(b) Freedom of
Choice Waivers
Choice Waivers
Choice Waivers
Alabama
2
Kentucky
4
North Dakota
3
Alaska
Louisiana
2
Ohio
3
Arizona
Maine
3
Oklahoma
I
Arkansas
5
Maryland
3
Oregon
3
California
18
Massachusetts
3
Pennsylvania
7
Colorado
5
Michigan
5
Rhode Island
Connecticut
1
Minnesota
2
South Carolina
2
Delaware
Mississippi
4
South Dakota
3
D.C.
2
Missouri
4
Tennessee
Florida
4
Montana
2
Texas
7
Georgia
5
Nebraska
2
Utah
3
Hawaii
Nevada
1
Vermont
Idaho
2
New Hampshire
Virginia
3
Illinois
New Jersey
1
Washington
14
Indiana
2
New Mexico
3
West Virginia
5
Iowa
4
New York
8
Wisconsin
4
Kansas
2
North Carolina
5
Wyoming
1
TOTAL
162
The numbers indicated include approved and pending new waivers, renewals, and modifications.
3
REPEAL OF MANAGED CARE CONTRACTING RULES
Administration Proposal
Under the Administration proposal, States will be able to contract with Medicaid-only managed care plans. States will also be able to
enroll Medicaid beneficiaries into managed care plans for up to six months at a time. Some States -- Hawaii and Rhode Island -- have
developed demonstration programs in order to implement managed care programs with these features.
States will no longer need to apply for demonstration authority to receive waivers of these statutory provisions.
States will be able to contract with a broader range of managed care entities.
Six-month lock-in provisions will attract more managed care plans to contract with Medicaid programs.
Background
Currently, Medicaid managed care plans must maintain a commercial enrollment base of twenty-five percent. This requirement - the
"75/25 rule" -- prohibits States from contracting with Medicaid-only managed care plans. In addition, Medicaid beneficiaries must be
able to disenroll from most managed care plans on a month-to-month basis, thus disrupting enrollment stability.
If these provisions were repealed, the programmatic elements (but not eligibility expansions) of some demonstration programs (Hawaii
and Rhode Island) could be operated without demonstration waivers. Other demonstration States, such as Oregon, require more
complicated waivers of Medicaid law and would therefore still need waiver authority to operate their demonstration programs.
4
ELIMINATION OF REQUIREMENT FOR FEDERAL REVIEW OF HMO CONTRACTS OVER $100,000
Administration Proposal:
Under the Administration's proposal, states will no longer need to seek Secretarial approval for HMO Contracts over $100,000.
All States with pre-paid managed care programs will avoid unnecessary and duplicative Federal oversight of their contracting
and rate-setting procedures.
This new flexibility will save states time and effort.
Background:
Currently, states must obtain HCFA's approval of all contracts with HMOs that exceed $100,000 in expenditures. This prior approval
requirement represents an unnecessary double-check on the state's contracting and rate-setting procedures. HCFA approval generally
takes between two and forty-five days.
See attached chart for state-by-state contract numbers.
5
FEDERAL APPROVAL OF MANAGED CARE CONTRACTS
Annual Estimate
STATE
NUMBER OF
STATE
NUMBER OF
STATE
NUMBER OF
CONTRACTS
CONTRACTS
CONTRACTS
Alabama
0
Kentucky
0
Ohio
14
Alaska
0
Louisiana
0
Oklahoma
12
Arizona
7
Maine
0 (6-8 next year)
Oregon
36
Arkansas
0
Maryland
6
Pennsylvania
9
California
16
Massachusetts
11
Puerto Rico
2
Colorado
7
Michigan
12
Rhode Island
5
Connecticut
11
Minnesota
9
South Carolina
0
Delaware
4
Mississippi
0
South Dakota
0
D.C.
4
Missouri
6
Tennessee
12
Florida
30
Montana
2
Texas
1 (8 next year)
Georgia
0
Nebraska
7
Utah
5
Hawaii
5
Nevada
0 (4 next year)
Vermont
0
Idaho
0
New Hampshire
3
Virginia
10
Illinois
7
New Jersey
25
Washington
30
Indiana
2
New Mexico
0
West Virginia
0
Iowa
8
New York
130
Wisconsin
11
Kansas
6
North Carolina
1
Wyoming
0
North Dakota
0
ESTIMATED TOTAL
466
6
II.
FLEXIBILITY IN PROGRAM PAYMENT
REPEAL OF THE BOREN AMENDMENT
Administration Proposal:
The Boren Amendment will be repealed, and replaced with a process for notifying the public about facility rates. Thus, states can
establish hospital and nursing home payment rates without federal requirements.
States will have flexibility to negotiate payment rates with providers.
States would no longer be required to submit assurances of the adequacy of their payment rates to HHS.
States will no longer face costly law suits from providers demanding higher payments.
Background:
Under current requirements, states are required to assure that payment rates for institutional facilities are reasonable and adequate to
meet the costs that must be incurred by an efficiently and economically operated facility.
Since 1984, plaintiffs have filed at least 173 cases alleging that States have failed to comply with the Boren Amendment. Under the
Administration's proposal, these suits would not be possible.
7
ELIMINATION OF SPECIAL PAYMENT REQUIREMENTS FOR OBSTETRICIANS AND PEDIATRICIANS
Administration Proposal:
The current burdensome requirements for data collection to document that states are meeting special payment rate requirements for
obstetricians and pediatricians will be repealed.
States will no longer have to collect and submit data on payment rates for obstetrical and pediatric services.
States will no longer have to submit state plan amendments for the Ob/Peds information that can range from 30 pages to over
300 pages in size.
Background
States are required to report the following information by April 1 of each year:
payment rates for obstetrical and pediatric services for the coming year;
data to document that the states' rates are sufficient to ensure access to these services is comparable to the access enjoyed by
the general population;
data that document that payment rates to HMOs take into account fee-for service payment rates for ob/ped services;
data on the average statewide payment rates.
The data collection and analysis required to fulfill these requirements involve, on average, at least 5 people in each state Medicaid
agency. In addition, staff from State licensing boards and provider offices are called upon to help states review and define data.
Preparation of the final report alone takes, on average, 2 weeks. State plan amendments for the Ob/Peds information range from 30
pages to over 300 pages in size depending on the state.
8
III. FLEXIBILITY IN PROGRAM BENEFITS
ELIMINATION OF REQUIREMENT FOR FEDERAL WAIVERS FOR HOME AND COMMUNITY BASED SERVICES
PROGRAMS
Administration Proposal:
States will be able to provide home and community-based services to their elderly and disabled Medicaid enrollees without the
administrative burden of seeking Federal waivers.
49 States with a total of 517 home and community-based waiver programs will no longer need to obtain federal approval and
renewal authority.
States can provide tailored home and community-based services simply by submitting a state plan amendment.
This simplification will save states approximately 6 months preparing new and renewal home and community-based waiver
requests.
Background:
Currently, states must apply for Federal waiver approval to provide home and community-based services to elderly and disabled
Medicaid beneficiaries. Waiver requests are administratively burdensome and repetitive because initial waiver approvals only last
three years and must be renewed every five years. States spend approximately 180 hours to prepare each new and renewal home and
community-based waiver request and approximately forty hours preparing an amendment to approved waivers. All 49 states with
HCBS waivers have more than one such waiver, with separate processing requirements for each.
See attached chart for affected states.
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HOME AND COMMUNITY-BASED WAIVER ACTIVITY
(1993-1996)
STATE
1915(C)HOME AND
STATE
1915(C) HOME AND
STATE
1915(C)HOME AND
COMMUNITY-BASED
COMMUNITY-BASED
COMMUNITY-
WAIVERERS
WAIVERS
BASED WAIVERS
Alabama
12
Kentucky
6
North Dakota
4
Alaska
12
Louisiana
12
Ohio
13
Arizona
Maine
12
Oklahoma
9
Arkansas
10
Maryland
8
Oregon
2
California
10
Massachusetts
3
Pennsylvania
14
Colorado
18
Michigan
12
Rhode Island
6
Connecticut
7
Minnesota
17
South Carolina
13
Delaware
7
Mississippi
6
South Dakota
8
D.C.
Missouri
11
Tennessee
15
Florida
17
Montana
5
Texas
22
Georgia
7
Nebraska
12
Utah
7
Hawaii
4
Nevada
9
Vermont
7
Idaho
4
New Hampshire
7
Virginia
7
Illinois
15
New Jersey
18
Washington
16
Indiana
24
New Mexico
4
West Virginia
3
Iowa
23
New York
15
Wisconsin
16
Kansas
7
North Carolina
13
Wyoming
8
TOTAL
517
The numbers indicated include approved and pending new waivers, renewals, and modifications.
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ENABLING STATES TO REQUIRE HEALTH MAINTENANCE ORGANIZATION ENROLLEES TO MAKE NOMINAL
COPAYMENTS
Administration Proposal:
The Administration's proposal would allow States and health plans to require nominal copayments from Medicaid beneficiaries who
are enrolled in HMOs to the extent that copayments could be imposed if the beneficiary were not enrolled in an HMO. For example,
states could not require children to make copayments, nor charge copayments for pregnancy-related services or emergency services.
States and health plans would have the flexibility to control unnecessary utilization better,
States could reduce their capitation payments based on plans' anticipated copayment revenues, and
Plans would still be required to provide services, regardless of enrollees' ability to make a copayment.
Background:
Currently, states cannot require categorically-eligible Medicaid beneficiaries who enroll in HMOs to make any type of cost-sharing
payment, including copayments. This restriction prohibits States and Medicaid-contracting health plans from using all available tools
to control unnecessary utilization of and payment for services. States currently have the ability to impose nominal copayments in the
fee-for-service portion of the Medicaid program.
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IV. FLEXIBILITY IN PROGRAM ELIGIBILITY
INCOME LEVEL FOR INFANTS AND PREGNANT WOMEN
Administration Proposal:
The 33 States that choose to cover pregnant women and infants above the minimum 133% of the Federal Poverty Level (FPL) will be
given the option to lower this income eligibility threshold back to the minimum level. Currently, once a State chooses to expand
Medicaid coverage to include populations at an income level above 133% FPL, they are prohibited from lowering the income
threshold back to 133% FPL.
Background
States that used a percentage of poverty for eligibility level for pregnant women and infants that was above the minimum percentage
required before OBRA 89 are currently prohibited from reducing that percentage.
The attached chart shows the 33 states that could take advantage of this provision today.
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INCOME AND ELIGIBILITY LEVELS: INFANTS AND PREGNANT WOMEN
The 33 Highlighted states could take advantage of this provision
STATE
PERCENT OF POVERTY
STATE
PERCENT OF POVERTY
STATE
PERCENT OF
POVERTY
Alabama
133
Kentucky
185
North Dakota
133
Alaska
133
Louisiana
133
Ohio
133
Arizona
140
Maine
185
Oklahoma
150
Arkansas
133
Maryland
185
Oregon
133
California
200*
Massachusetts
185
Pennsylvania
185
Colorado
133
Michigan
185
Rhode Island
250**
Connecticut
185
Minnesota
275*
South Carolina
185
Delaware
185
Mississippi
185
South Dakota
133
D.C.
185
Missouri
185
Tennessee
185
Florida
185
Montana
133
Texas
185
Georgia
185
Nebraska
150
Utah
133
Hawaii
300**
Nevada
133
Vermont
225*
Idaho
133
New Hampshire
185
Virginia
133
Illinois
133
New Jersey
185
Washington
200*
Indiana
150
New Mexico
185
West Virginia
150
Iowa
185
New York
185
Wisconsin
185
Kansas
150
North Carolina
185
Wyoming
133
States with effective income levels above the nominal statutory maximum use the authority in section 1902(r)(2) to disregard higher than
usual amounts of income.
States using higher income level as part of demonstration under section 1115.
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V. FLEXIBILITY IN STATE ADMINISTRATION
REFORMING MEDICAID ELIGIBILITY QUALITY CONTROL (MEQC)
Administration Proposal:
The Administration's proposal reduces the complex accounting and individualized cost accounting currently required under MEQC,
by requiring that states address only the numbers of ineligibles and the average cost per ineligible in the appropriate group.
Details of spending on each ineligible case will not have to be documented, and
Disallowances will not be distorted and excessively inflated when the ineligible sample includes a very few very high cost
cases.
All states will benefit from this reduction in individualized tracking. Though only a few States have excessive error rates (the national
average has hovered around 2 percent for several years), all states are currently required to go through the entire determination,
adjudication, cost accounting process every six months.
Background:
Federal matching funds are disallowed to the extent that a State makes excessive errors in determining ineligible persons to be eligible
for Medicaid or understates the amount of medical bill that a person must be responsible for before becoming eligible. "Excessive"
means erroneous payments in excess of 3 percent of total payments. In certain circumstances, disallowances may be waived (e.g., if
excessive errors are explained by events beyond the State's control).
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REVISE AND SIMPLIFY MEDICAID MANAGEMENT INFORMATION SYSTEM (MMIS) REQUIREMENTS
Administration proposal:
States would have new flexibility to design, structure, and operate their Medicaid Management Information Systems within general
federal parameters rather being required to comply with the detailed systems design requirements and planning documentation
requirements in effect today.
All states will be able to operate MMIS systems that are more tailored to State circumstances and thus more cost-effective.
The Secretary will retain appropriate oversight authority and the ability to enforce general Federal parameters, but the States
will not be hamstrung by a Medicaid equivalent of "mandatory sentencing."
Because current financial penalties for non-compliance will be repealed, HCFA's on-site reviews of State MMIS systems
would be less frequent and less intrusive. States would no longer need to dedicate several staff members to month-long
preparations for these reviews.
Background:
Currently, as a requirement for federal administrative matching, all States must operate a Medicaid Management Information System
that meets highly detailed Federal requirements. Compliance is continuously and rigorously monitored. Non-compliance results in
financial penalties, which are elaborated in considerable statutory detail.
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PROVIDER QUALIFICATIONS FOR OBSTETRICIANS AND PEDIATRICIANS
Administration Proposal:
The administration proposal would eliminate the detailed minimum provider qualifications that specify requirements that must be met
by physicians serving pregnant women and children.
The requirements that would be eliminated are difficult for practitioners in large urban and underserved rural states to meet. This
proposal would make state licensure requirements the only qualification requirements practitioners serving pregnant women and
children would have to meet.
Background:
Section 1903(I) establishes provider qualifications for physicians serving pregnant women and children. Physicians must be certified
in family practice or pediatrics, affiliated with an FQHC, have admitting privileges at a hospital participating in a State plan, a member
of the National Health Service Corps, or certified by the Secretary as qualified to provide physicians' services to pregnant women.
Implications of the current policy are significant.
New York estimated that only 1/3 of its physician provider population would remain eligible to treat pregnant women and
children.
Rural states e.g., Montana have indicated that the only source of physician care in some counties is from physicians who do not
meet one of the qualifications.
New Mexico conducted a quick review of disciplinary actions under licensure and found that all of the involved physicians met
the Medicaid standards.
The AMA estimates that approximately one third of the nation's physicians are not board certified.
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ELIMINATION OF REQUIREMENTS TO PAY FOR PRIVATE HEALTH INSURANCE
Administration proposal:
The current Federal requirements in this area would be repealed. States will have the option to purchase health insurance for their
Medicaid population under flexible terms of negotiation with insurers. States will be free to negotiate benefit packages, premiums,
and cost sharing rates (deductible and co-payments). States would continue to have the option to continue such "buy-out" kinds of
programs -- particularly cost-effective "buy-out" arrangements.
Background:
Currently, states must pay premiums and all other cost-sharing obligations for a private insurance plan for Medicaid eligibles when
this strategy provides cost-effective coverage.
Free of federal restrictions, states should be able to do a better job of restraining costs by moving people into private insurance. This is
because Federal requirements require states to consider all cost-sharing related to private insurance. Because private plan deductibles
and coinsurance amounts typically exceed the Medicaid rate for the same services, this requirement restricts the number of cases
where a "buy-out" would be cost-effective. Also, the requirement is virtually impossible for states to administer since every plan may
has different payment rules.
17
ELIMINATION OF PERSONNEL REQUIREMENTS
Administration proposal:
Prescriptive Federal personnel standards and requirements that currently must be met by states would be replaced with a simple
requirement that states provide methods of administration which are necessary for the proper and efficient operation of the plan. The
detailed state plan requirements and documentation currently required would be eliminated.
Background:
Federal statute and regulations mandate in some detail that states must provide methods of administration for the establishment and
maintenance of merit system-based personnel standards, and states must use professional medical personnel for administration and
supervision. Many of these federal requirements are duplicative of state requirements and processes. States are required to provide
considerable documentation for this portion of their state plan.
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ELIMINATION OF REQUIREMENT FOR COOPERATIVE AGREEMENTS
Administration Proposal:
The current requirements for entering into cooperative agreements with numerous other state agencies would be repealed. Also
repealed would be any requirements that states provide documentation, as a part of their state plan, that the agreements are in place and
current.
The repeal of these requirements would alleviate considerable administrative burden for states, and would allow flexibility to pursue
management of Medicaid withing the circumstances within each state's administrative practices and circumstances.
Background:
Section 1902(a) requires that a State Plan must "provide for entering into cooperative arrangements" with other State agencies. Some
States have interpreted this to mean they must submit state plan amendments with the actual agreements every time an agreement is
established or there is a change to an existing agreement. The requirement, however, is for states only to indicate in their State plan
that agreements exist and identify which agencies the agreements are with. States are not required to submit the actual agreements.
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ELIMINATION OF REQUIREMENTS FOR PREADMISSION SCREENING AND ANNUAL RESIDENT REVIEW
(PASARR)
Administration proposal:
Replace the requirement for an annual resident review for all residents, with a requirement that States conduct an annual resident
review on an exception basis. Under the Administration proposal, reviews would be conducted only when the NF resident assessment
indicates a significant change in the physical or mental condition of the resident.
This would provide considerable administrative flexibility to focus scarce resources on those residents whose condition indicates there
is a need for additional intervention and assessment. This proposal relieves the states of burdensome, costly, annual reviews of every
resident which duplicate, in large part, the required evaluations and add little value to meeting the needs of residents.
Background:
States are required to perreform resident assessments promptly after admission, after a significant change in physical or mental
condition and no less often than annually thereafter for all mentally retarded or mentally ill individuals residing in facilities.
Although each state administers their reviews differently, the state of Washington can be looked to as a case example. In 1991,
Washington conducted 400 annual resident reviews at a cost of $750,000. Under the administration's proposal, the State of
Washington's burden would be reduced significantly because duplicative reviews would be eliminated. However, the actual reduction
cannot be quantified.
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