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January 2009

CMS Gives States More Control Over Medicaid Benefit Packages, Premiums, and Cost Sharing Requirements

In early December, the Centers for Medicare & Medicaid Services (CMS) announced a final rule for redesigning Medicaid that will give states a greater degree of flexibility in creating their Medicaid benefit offerings.  The rule is part of the Deficit Reduction Act of 2005 (DRA) and reflects the outgoing administration’s goal of “aligning Medicaid more closely with private market insurance” and “giving states more control over their Medicaid benefits packages.”  The new rule is one of many regulations designed to implement provisions of the DRA.  Of note is that a number of these regulations are subject to congressional moratorium, so whether this final rule will actually be implemented remains somewhat unclear.[1]

With this regulation states will be able to offer Medicaid beneficiaries alternative benefit packages, called “benchmark plans,” that have the same health care value as plans that are offered throughout the state to non-Medicaid populations.  States can design new programs modeled after various benchmark plans, including:

  • State employee coverage
  • Coverage that is offered by the state’s largest commercial health maintenance organization
  • The standard Blue Cross/Blue Shield preferred provider option benefit plan under the Federal Employees Health Benefit Plan
  • Coverage that the Secretary of Health and Human Services approves

This range of benchmark plan options offers states the opportunity to tailor benefits to meet more specific beneficiary needs, allows individuals to obtain integrated coverage for acute care and community-based long term care as needed, and gives states the option to provide wrap-around and additional benefits, like dental coverage.

CMS also published another rule as part of the DRA that enables states to change current premiums and cost sharing requirements—closely following what is allowed under SCHIP in that all cost sharing must be limited to no more than 5 percent of the family’s income.[2]

[1] “CMS Issues Final Rule for Redesigning Medicaid, States Have Greater Flexibility in Benefit Offerings,” CMS Press Release, December 3, 2008. 

[2] Ibid.