Medicaid
Medicaid is a jointly funded federal-state program that provides health insurance coverage for low-income families and children, people with disabilities, and the elderly. It is the nation's largest health insurance program, providing coverage for more than 62 million people and costing over $360 billion annually.
Because of the opportunity to obtain federal matching funds, Medicaid is often looked to as an integral part of state strategies to provide insurance coverage for the low-income uninsured. States administer their Medicaid programs within federal guidelines. Each state establishes specific eligibility rules under Medicaid, but must also meet mandatory minimum federal requirements. Additionally, there are groups of individuals that states have the option to cover under Medicaid.
There are still some people, however, who are ineligible for Medicaid regardless of their income because they don't meet the categorical requirements of Medicaid. That is, they don't fall into a group that federal Medicaid eligibility rules allow. For example, in most states childless adults are not eligible for Medicaid regardless of how low their income is unless they fall into an otherwise allowable federal group.
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Medicaid Eligibility Groups
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Mandatory Populations
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Optional Populations
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Children age 6 and older below 100% FPL
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Low-income children above 100% FPL who are not mandatory by age
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Children under age 6 below 133% FPL
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Low-income parents with incomes above state's 1996 AFDC level
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Parents below a state's AFDC cutoffs as of July 1996 (median=42% FPL)
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Pregnant women above 133% FPL
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Pregnant women < 133% FPL
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Disabled and elderly below 100% FPL, but above SSI level
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Elderly and disabled SSI beneficiaries with incomes < 74% FPL
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Individuals at risk of needing nursing facility or ICF-MR care (under HCBS waiver)
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Certain working disabled
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Certain working disabled (>SSI levels)
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Medicare buy-in groups (QMBs, SLMBs, QI)
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Medically needy
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Source: The Henry J. Kaiser Family Foundation, Medicaid Enrollment and Spending by "Mandatory" and "Optional" Eligibility and Benefit Categories, June 2005.
Most states have chosen to expand Medicaid coverage above the minimum federal levels. The federal rules give states flexibility in how income eligibility is calculated within these groups. This flexibility as well as coverage expansions through federal waivers has created a large amount of variation from state to state in Medicaid eligibility thresholds. There are states that cover parents with incomes up to 275 percent of the federal poverty level (FPL) while other states require parental income to be below 20 percent FPL to receive Medicaid.
Low-Income Families
Over the years, numerous changes have been made to Medicaid to create more opportunities for Medicaid to cover optional coverage groups. Recent changes include the 1996 welfare reform law, which de- linked Medicaid and cash assistance and created a new eligibility category based on state Aid to Families with Dependent Children (AFDC) eligibility standards in effect on July 16, 1996. Known as Section 1931, this provision requires states to cover at least those families with incomes below the 1996 AFDC income limits, regardless of whether they receive cash assistance. In addition, under Section 1931, states have greater flexibility to extend eligibility to more low-income families using any of these three mechanisms: 1) income disregards; 2) asset disregards; and 3) increasing income and asset limits by as much as the increase in inflation since July 1996. Income disregards and asset disregards are both tools that states can use to virtually "ignore" a portion of an individual's income or countable assets, which in effect will allow higher income and asset limits for Medicaid eligibility. There are no limits to these disregards, so states are free to raise effective income limits as high as they choose.
Specific Eligibility
The Ticket to Work and Work Incentives Improvement Act of 1999 allows states the option to permit individuals with disabilities who are working to maintain their Medicaid eligibility. As of December 31, 2006, 33 states had implemented Medicaid buy-programs for working individuals with disabilities. Collectively, these programs are covering 80,871 individuals.[1]In 2000, states were given the option to extend Medicaid eligibility to women who are diagnosed with breast or cervical cancer through a screening program funded by the Centers for Disease Control and Prevention (CDC). All 50 states have approved state plan amendments to cover this group.
State Children's Health Insurance Program (SCHIP)
The State Children's Health Insurance Program (SCHIP) allows states to provide insurance coverage to uninsured children in low-income families that are not otherwise eligible for Medicaid. Enacted in 1997, the program now covers more than four million children. Like Medicaid, states administer the SCHIP program and receive federal matching funds. However, the federal government provides a higher matching rate for SCHIP than for Medicaid.
Under SCHIP, states also have greater flexibility than under Medicaid to define benefits and set cost-sharing requirements. States can use SCHIP funds to expand Medicaid eligibility for children or to establish stand-alone SCHIP programs to provide coverage for children. Fourteen states have opted to use the federal SCHIP matching funds to finance Medicaid eligibility expansions for children; 19 states have created separate SCHIP programs; and 18 states have combination Medicaid and SCHIP programs.
Waivers
In addition to covering mandatory and optional groups under Medicaid and SCHIP, states have used waivers to change federal requirements in these programs and cover more people.
Medicaid/SCHIP Section 1115 Waivers
Section 1115 of the Social Security Act grants the Secretary of the U.S. Department of Health and Human Services broad authority to waive certain federal requirements for the purpose of conducting pilot, experimental, or demonstration projects that are likely to promote the objectives of the program. States have used this federal waiver authority to change their program in ways that would not otherwise be allowable under federal requirements. Many states have used waivers to expand Medicaid eligibility to new groups of people. In addition to eligibility changes, waivers have been used to change other federal requirements such as rules related to the delivery system or benefit package design.
The review process for Section 1115 waivers can be lengthy and the Centers for Medicare and Medicaid Services (CMS-the federal agency responsible for granting the waivers) policy requires that Medicaid waivers must be budget neutral. This means that CMS will not approve waivers that would result in a higher level of federal spending than would have occurred without the waiver. Budget neutrality agreements between the state and federal government are negotiated during the waiver approval process and require a number of assumptions about spending trends and the likely impact of cost-saving features of the proposed waiver.
In 2000, CMS issued guidelines for states in proposing waivers under the SCHIP program. These guidelines required that states seeking to expand coverage through a SCHIP Section 1115 waiver show that they had met the primary goal of SCHIP: providing services to low-income children, enrolling, and serving them. Several states have used SCHIP waivers to expand coverage to parents. While states are already able to cover many parents under Medicaid without a waiver, expanding coverage under SCHIP allows states to receive the SCHIP enhanced federal matching rate.
Under the SCHIP program, each state receives a federal allotment that limits the amount of federal funds available to them. Unlike Medicaid waivers, SCHIP waivers don't have to meet the budget neutrality requirement, however they must limit federal spending to what is available under the state's SCHIP allotment. This feature is known as allotment neutrality.
HIFA Waivers
In August 2001, the U.S. Department of Health and Human Services launched a major new Section 1115 waiver initiative, the Health Insurance Flexibility and Accountability (HIFA) initiative. The goal of HIFA is to encourage new comprehensive state approaches that will increase the number of individuals with health insurance coverage within current level Medicaid and SCHIP resources. The HIFA initiative builds on the 1115 waiver authority to provide states enhanced flexibility and an expedited review process.
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Key Elements of a HIFA Demonstration
In order to be considered a HIFA demonstration, a proposal MUST:
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Include a coverage expansion;
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Include a public-private coordination component;
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Set a goal and include a methodology for monitoring changes in the rate of uninsurance;
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Promise to meet maintenance of effort (if a state-funded program is being federalized); and
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Meet a test of budget neutrality (for Medicaid funds) or allotment neutrality (for SCHIP funds).
A HIFA proposal may NOT:
Under HIFA, a state MAY:
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Reduce benefits and/or increase cost-sharing, including the ability to provide only a primary care benefit package to certain populations;
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Impose enrollment caps;
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Federalize a state-funded program (provided maintenance of effort is met);
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Use unspent SCHIP funds to finance increased coverage; and
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Divert DSH funds to finance increased coverage
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The HIFA initiative continues to require that waivers meet either budget neutrality or allotment neutrality requirements, but permits states to offset coverage expansions in ways that have not been allowed in the past-by redirecting Disproportionate Share Hospital (DSH) funds or changing the benefit design for optional Medicaid populations. HIFA guidelines also broadened the possible uses of SCHIP funds to allow states to cover adults without dependent children. States may also lower the cost of an expansion by scaling back benefits, charging higher cost-sharing, or capping enrollment for the newly eligible groups covered by the waiver.
The Bush Administration has put a particular emphasis on broad statewide approaches that maximize private health insurance coverage options and target Medicaid and SCHIP resources to populations with income below 200 percent FPL.
The other central component of the HIFA initiative is an emphasis on encouraging employer-sponsored insurance. The most common way states have built upon employer- sponsored insurance is by implementing a premium assistance program. Premium assistance allows states to use Medicaid or SCHIP funds to subsidize health coverage purchased through employers or in the individual market. Premium assistance is already an option for states under Medicaid and SCHIP without a waiver, but HIFA provides enhanced flexibility to design these programs.
The Deficit Reduction Act of 2005
In February 2006, President George W. Bush signed the Deficit Reduction Act of 2005, one of the most significant changes to the Medicaid program in its 40 year history. The DRA is projected to reduce federal Medicaid spending by $11.5 billion over five years and $43.2 billion over 10 years. The DRA provides states with new flexibility to make certain changes, which would have previously required waiver authority, through the more streamlined state plan amendment process. The DRA does not, however, provide states with a new vehicle for expanding coverage with the exception of giving states the option to allow parents of certain children with disabilities to “buy-in” to Medicaid for their children if they have a family income at or below 300 percent FPL. In fact, the flexibility provided under the DRA is limited to groups covered prior to 2006.
During 2006, West Virginia, Kentucky, Idaho, and Kansas received federal approval for their reform proposals under DRA authority. All of these proposals use the flexibility in benefit design and cost sharing to tailor benefit packages to specific populations and also encourage greater consumer involvement in health care.
