Will CMS Allow Limits on Medicaid Eligibility?

Arkansas hospitals have backed a new Medicaid waiver but worry some provisions could increase their bad debt and charity care expenses.

March 7—Federal officials this week approved the third Medicaid waiver that requires work or other steps by beneficiaries but put off a decision on the key question of limiting eligibility.

The Centers for Medicare & Medicaid Services (CMS) approved Arkansas’ 1115 Medicaid waiver, which requires some adult beneficiaries younger than 50 to work or participate in job training, community service, or other “community engagement” activities for at least 80 hours each month to retain Medicaid coverage.

Arkansas joins Kentucky and Indiana in obtaining work-related requirements for Medicaid enrollees, and similar approvals are being sought by seven other states: Arizona, Maine, Michigan, Mississippi, North Carolina, Utah, and Wisconsin. 

As with the previously approved work-related waivers, hospitals in the state backed the three-year waiver, known as Arkansas Works. The waiver continues the state’s unique Medicaid expansion, which allows the use of premium assistance to purchase coverage through the Affordable Care Act (ACA) marketplace—known as the private option.

“We are concerned about the implementation of the work requirement,” Bo Ryall, president and CEO of the Arkansas Hospital Association, said in an interview.

However, the exemptions to the requirement, which mirror those for food stamps, seemed appropriate, he said.

The work requirement was grudgingly accepted by hospitals because it was required for the continuation of Medicaid expansion to obtain the support of three-fourths of state legislators, Ryall said.

The state’s Medicaid expansion was credited with a 77.8 percent decrease in hospitals’ uncompensated-care costs in the year after implementation. Most hospitals reported no change in patient volume following the expansion, and more hospitals reported a decrease in volume as opposed to an increase.

Other Concerns

Hospitals also were concerned about a couple other provisions of the waiver, they noted in the application.

The state hospital association opposed a provision replacing 90-day retroactive coverage in the private option with coverage only at the time of application. Hospitals had urged the state to provide at least 60 days of retroactive coverage or implementation of presumptive eligibility.

CMS wrote that the policy aims to test whether eliminating the retroactive coverage would encourage beneficiaries to obtain and maintain coverage even when healthy.

But hospitals were “concerned that an otherwise-eligible beneficiary will be saddled with large amounts of healthcare debt that could have been avoided,” Ryall wrote in response to the waiver application.

Another concern was about the waiver’s plan to create wrap-around Medicaid coverage of employer-sponsored insurance for those who are otherwise eligible for Medicaid. Hospitals were concerned that such an approach would be burdensome for providers and consumers, including by making it difficult to determine which bills go to the employer-sponsored insurance and which go to Medicaid.

Potential Eligibility Reduction

The CMS waiver approval did not address the state’s request to reduce income eligibility for adults in its Medicaid program from 138 percent to 100 percent of the federal poverty level (FPL).

CMS said in its approval that it was not granting the reduced eligibility “at this time” but did not reject the proposal outright, as the Obama administration had done.

The ACA required that states use federal funds to expand Medicaid eligibility to all adults earning up to 138 percent of the FPL. Massachusetts also has requested the reduced eligibility, and other states may follow if CMS allows the approach.

“That is something that we know is being discussed at the administration level and that we expect to see a decision on sometime in the future,” said Tiernan Meyer, a senior manager at Avalere Health.

Arkansas hospitals oppose the provision because of their concern that up to 60,000 enrollees in the private option would not successfully transition to newly established subsidized private-insurance plans, leaving them uninsured and exposing hospitals to more uncompensated-care costs. Depending on the number of beneficiaries who are unable to transition to new plans, those costs could increase by between $20 million and $50 million per year, according to the Arkansas Department of Human Services.

The option to limit eligibility to 100 percent of the FPL may appeal both to expansion states looking to reduce costs and to states still considering whether to undertake the expansion.

If CMS approves the reduced eligibility in all expansion states, about 4 million beneficiaries potentially would move from Medicaid to ACA marketplace coverage, according to an Avalere analysis. Conversely, if all non-expansion states undertook a limited expansion to 100 percent of the FPL, another 7 million would be added to Medicaid rolls.

“If this ended up being approved in Arkansas, and/or in Massachusetts, it could be a really interesting shift in some of the Medicaid expansion discussions and could lead to a lot more states actually considering this,” Meyer said.

Hospitals facing such a shift in their state can do little to prepare for it, Ryall said, because any such steps depend on receiving information from the state or insurers regarding the patients who need to be moved to the new types of plans.

“We would not be able to reach out to them—but the commercial insurers certainly could—to help them move over,” he said.

What’s Next

Beyond the unresolved issue of restricting Medicaid eligibility, other federal Medicaid policy issues that are expected to arise this year include the possibility of a demonstration project on direct coverage and a managed care rule in “late summer or early fall,” said Megan Olsen, a senior manager for Avalere.

“That’s expected to provide states with some additional flexibility around some of the managed care provisions that the Obama administration established,” Olsen said.

Other Medicaid policy changes also could be included in a federal omnibus funding bill that is needed before federal funding expires in a couple weeks.

For instance, some of the sweeping Medicaid changes that congressional Republicans tried to enact in 2017 could return as stand-alone policies. Those proposed changes included repealing the enhanced federal match of the expansion population and moving from an open-ended to a fixed federal-financing structure.

The latter change could cut federal Medicaid funding by between 6 percent and 26 percent, according to another Avalere analysis.

“We saw that states that expanded Medicaid would see a lot more significant decrease in federal funding,” Olsen said about the average 19 percent decrease in federal funding among those states.

Any federal cuts would require states to find new funding or cut expenses, which could include restricting eligibility, adding more work requirements, reducing coverage or some benefits, expanding the use of utilization management, and cutting provider rates, she said.

New state funding could include new taxes, expanded taxes, or a shift in funding from other parts of the budget to Medicaid.

“It’s likely that states will probably pursue a variety or combination of these strategies under these scenarios,” Olsen said.   

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Rich Daly is a senior writer/editor in HFMA’s Washington, D.C., office. Follow Rich on Twitter: @rdalyhealthcare.