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March 2011 St@teside

State Flexibility under Maintenance of Effort Requirements

Amid state budget concerns, on January 7, 2011, 33 governors across the country asked the Obama administration and Congress to lift the maintenance of effort (MOE) requirements included in the Patient Protection and Affordable Care Act (ACA).1  On February 25, the U.S. Department of Health and Human Services (HHS) responded by issuing a letter and a FAQ document outlining states’ options for changing eligibility rules under the MOE.  The Department noted that further guidance will follow.

The letter and supporting FAQ documents address three aspects of the MOE provisions:

  • Covering Higher Income Adults. States that are experiencing budget deficits can be exempted from covering adults above 133 percent of the federal poverty level (FPL) who are not otherwise eligible for Medicaid on the basis of pregnancy or disability.
  • Section 1115 demonstration projects. MOE provisions apply to Medicaid Section 1115 waivers and demonstrations in states that currently have such waivers and demonstration. However, the MOE provisions do not require the state to seek a new or renewed waiver after it expires.
  • Premium treatment. Guidance for MOE requirements offers more flexibility to states compared to the guidance under the Recovery Act.  According to HHS, this will help states that have been requesting the ability to adjust premiums for populations such as children in Medicaid and Children’s Health Insurance Program (CHIP) with family incomes above 150 percent FPL.

Although the secretary of HHS has encouraged states to find ways to cut Medicaid costs while still complying with the MOE requirements, some governors have been pushing for block grants as a way to increase flexibility in the Medicaid program.2

Adding to state budget concerns is the July 1 expiration of increased federal Medicaid payments under the stimulus law.  According to a study by the Council of State Governments:

  • 13 states—mostly in the East and Midwest—and D.C., will return to the same federal Medicaid match they received in 2008.
  • 17 states will receive a higher federal match in 2012 than in 2008, but lower than the amounts they received since 2008.
  • 20 states will receive a lower rate of federal Medicaid match in 2012 than in 2008.

1BNA’s Health Care Policy Report. (Subscription only). (2011, January 17). Republican Governors Push Congress to Allow Stricter Eligibility Requirements. Retrieved March 22, 2011 from
2Barr, S. (2011, March 7). Governors Push for Greater Flexibility; Some Republicans Suggest Block Grants. BNA’s Health Care Policy Report (Subscription only). Retrieved March 24, 2011, from