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February 2011 St@teside

HHS Provides Guidance on State Flexibility in Medicaid

In response to states’ pervasive budget deficits and the related challenges of managing costly Medicaid programs, Department of Health and Human Services (HHS) Secretary Kathleen Sebelius sent a letter to governors outlining areas where states have flexibility to address rising costs.

The February 3 letter and a corresponding report outlined four areas where states have existing flexibility in the Medicaid program and as well as new options available under the Affordable Care Act (ACA). The areas fall into four broad categories: cost-sharing and benefits; managing care for high cost enrollees more effectively; purchasing drugs more efficiently; and assuring program integrity.

Of particular interest were the strategies to address enrollees with high costs.  Strategies offered to improve care and efficiency include:

  • Care and payment models for children’s hospitals;
  • “Money follows the Person” demonstration grants;
  • Initiatives to change care and payment models to reduce premature births;
  • Promoting better care management for children and adults with asthma;
  • Initiatives to reduce hospital readmissions;
  • Implementing the new Health Homes (i.e., medical homes) option under ACA;
  • Promoting accountable care organizations (ACOs); and
  • Continuing to integrate health information technology.

The report also underscores the importance of improving care for the dual eligible population. The new Federal Coordinated Health Care Office recently announced that it will award up to $1 million to 15 states to help design care models for dual eligibles.