HHS reserves 100 percent federal match for states that opt for full Medicaid expansion

Republican governors who were questioning whether the Department of Health & Human Services (HHS) would fully fund partial Medicaid expansion got their answer on Dec. 10: Only states that fully expand will qualify for a 100 percent federal match.

Under the health reform law, states are to expand Medicaid to those earning up to 138 percent of the federal poverty level, or about $38,000 for a family of four.

HHS Secretary Kathleen Sebelius said in a Dec. 10 letter that the federal government will pay 100 percent of the cost of all newly eligible individuals only under the health reform law for three years starting in 2014. Then support gradually declines to 90 percent in 2020.

The 100-percent federal matching funds for the first three years is the rate reserved for the full expansion, according to Cindy Mann, deputy administrator for the Centers for Medicare & Medicaid Services and director of the Center for Medicaid and CHIP (Children’s Health Insurance Program).

“We will not allow partial expansions either through a state plan or through a waiver when the expansion is at or below 100 percent of the poverty level. We will consider waivers if a state wants to cover certain numbers of individuals or expand to certain income levels like we do now for a state’s request under the regular match rate,” Mann said during a Dec. 10 tele-briefing with reporters.

The cost of traditional Medicaid programs is a partnership, with the federal government paying about 60 percent and the state 40 percent. States, however, differ on the extent of eligibility. Many states offer Medicaid coverage to those earning 100 percent of poverty level, but some states limit eligibility to those making far less than the poverty level. For example, Texas limits eligibility to those making about 25 percent of the federal poverty level.

States have no deadline by which to notify HHS of their intention to expand Medicaid or not. The Supreme Court decision on the Affordable Care Act (ACA) made Medicaid expansion optional for states. The HHS secretary’s response on partial Medicaid expansion may influence governors and state legislatures as they consider whether or not to participate.

States could apply for partial expansion through a waiver after 2016. The ACA allows for state innovation waivers on the health insurance exchange side in 2017 with requirements that states come in with ideas on how they might deliver care differently as long as there are “just as many people covered, and benefits are no less than what they would have been under the provisions in the law” for Medicaid expansion, and there are no additional costs for consumers or the federal government, Mann said.

HHS also announced that six states have received conditional approval for their plans for establishing their health insurance exchanges and have already shown significant progress toward being ready for operation in October 2013.

Colorado, Connecticut, Maryland, Massachusetts, Oregon and Washington provided their insurance exchange blueprints first, said Gary Cohen, CMS deputy administrator and director of the Center for Consumer Information and Insurance Oversight (CCIIO).

“It is purely a matter of who came in first and who we got to first. We expect to get to all of them by Jan. 1,” he said. So far, 14 states and the District of Columbia have said they want to be state-based exchanges. “We are optimistic that other states will come in,” Cohen said.

States have until Dec. 14 to notify CMS of their intent to build a state-based exchange model.

Sebelius also sent governors a document with the letter containing 40 of the most frequently asked questions raised by governors and state legislators to help them navigate the activities to establish the online marketplace.

“As both a former governor and state insurance commissioner, I believe that states are in the best position to make decisions about their health insurance marketplaces," Sebelius explained. "As such, I am committed to providing you with as much guidance and information as I can over the coming weeks and months to help with the significant decisions you must make."

The six states receiving conditional approval for their exchanges demonstrated that they have taken advantage of the flexibility provided under the law to build the exchanges, according to Amanda Crowley, acting director for state health insurance exchanges at CCIIO.

“These states are great examples of different kinds of approaches they’re taking to make their exchanges fit into the health and human services environment in their state,” Crowley said. For example, Colorado has created an exchange as a quasi-government, not-for profit institution, which is different from the approach taken by Connecticut.

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