Last week, we discussed the budding debate over the Medicaid Maintenance of Effort (MOE) and whether the mandate remains in force in light of the Supreme Court’s ruling regarding the Patient Protection and Affordable Care Acts (PPACA). The ruling effectively barred the federal Department of Health and Human Services (HHS) and Centers for Medicaid and Medicaid Services (CMS) from penalizing states if they do not expand Medicaid pursuant to health reform. But the MOE requirement, which stops states from reducing eligibility in the program through 2014 for adults and into 2019 for children, was left in limbo. As we told you, the Congressional Research Service (CRS) concluded that the MOE is still in force.
In the past week, the MOE and a number of other Medicaid issues have hit the headlines and could engender fierce controversy through Election Day and thereafter.
• States look to be increasing likely to challenge the CRS/HHS/CMS view on the MOE requirement. Dennis Smith, Wisconsin’s top human services official who once led CMS’ Medicaid operations, is predicting that litigation over MOE will likely occur if HHS and CMS do not back down on the view that the mandate is undisturbed by the Supreme Court ruling. He says that attorneys in his state disagree with the Congressional Research Service (CRS) conclusion that the MOE is still in force. While Smith served under President George Bush, he had the reputation of being a no-nonsense policy leader who kept politics out of day-to-day CMS operations.
To forego a fight on the issue, CMS may choose to grant waivers from the strict PPACA requirement. Wisconsin is one state that has received permission to tighten eligibility requirements, which will mean some residents lose eligibility for the program. But don’t expect the Obama administration to go much beyond state-by-state waivers. All told, this year about a dozen states cut or eliminated benefits, increased premiums or copays, cut provider rates, or raised eligibility thresholds and thereby reduced enrollment (potentially violating PPACA MOE in some cases).
• Democrats are upset that the high court effectively allowed many states to unravel the planned expansion of Medicaid. This is underscored by a new Congressional Budget Office (CBO) estimate of the cost of PPACA. It concludes that only about two-thirds of the people who would be newly eligible for Medicaid under the strict PPACA expansion will now end up becoming eligible for Medicaid over the next decade because states forego Medicaid expansion or only partially expand. As we have noted in the past, a strict reading of PPACA suggests that many of these individuals would not be eligible for Exchange subsidies, either. CBO estimates that only about half of those shut out of Medicaid in these states would end up in the state Exchanges.
The CBO numbers could change dramatically depending on the position HHS and CMS take to partial expansion. If HHS and CMS say that partial expansions are not allowed, the number of targeted beneficiaries could be markedly lower than what CBO projects. Right now, HHS and CMS have not taken an official position on whether it will mandate full expansions, but a second-term Obama administration would likely have to acquiesce to partial expansions to mitigate negative fallout on a key initiative.
• Hospitals’ anxiety over the current state of the Medicaid expansion is on par with advocates and most Democrats. Hospitals, especially safety net ones with high levels of uninsured, face a huge funding dilemma. In part, PPACA’s Exchange subsidies and the Medicaid expansion are paid for by massive cuts to certain Medicaid and Medicare FFS programs and grants. One of the major cuts revolves around halving Disproportionate Share Hospital (DSH) payments, which predominantly cover costs at large hospital systems for uninsured care and under-reimbursement in the Medicaid system. Hospitals in states where Medicaid will be expanded theoretically break even as the uninsured become covered through Medicaid (although hospitals remain concerned about the exact math working out). But in states that don’t expand Medicaid, charity care hospitals face the prospect of DSH cuts without the concomitant Medicaid dollars covering the uninsured.
In a recent meeting with HHS, potentially impacted hospitals were told to lobby hard for the Medicaid expansion in their states. Government officials refused to give any assurance that DSH cuts would be restored in states that refused expansion opportunities. It is clear that CMS and HHS want to use the impending cuts as a cudgel to move recalcitrant states. It is equally unclear whether CMS has authority to restore such funding, except perhaps through waivers.