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The American Health Care Act Proposes Sweeping Changes to Medicaid


Email Alert

May 8, 2017

By Felicia Sze*

On May 4, the House of Representatives passed the American Health Care Act of 2017 (H.R. 1628). As currently drafted, H.R. 1628 envisions a number of significant changes to the ways in which states may implement and operate their Medicaid programs, with provisions that would affect (1) the structure of federal/state shared funding; (2) eligibility and enrollment; and (3) provider payments, among other areas. H.R. 1628 is part of the effort to repeal and/or replace the Affordable Care Act (ACA), which introduced sweeping reforms to public programs and private sector health insurance, including a requirement that states expand Medicaid eligibility. In 2012, the Supreme Court of the United States re-cast the Medicaid expansion requirement as an option. To date, a majority of the states have elected to expand Medicaid.

Most significant for many states is the proposed change to the way that the federal and state governments share responsibility for funding the Medicaid programs. Historically, the Medicaid programs have been funded by states and the federal government, with the federal government funding between 50% and 83% of the costs of Medicaid. Federal funding has been guaranteed for qualifying expenditures. H.R. 1628 would change this formula by establishing targeted spending caps based on per capita allotments for each state. Beginning in 2020, to the extent that a state exceeds its spending cap in a fiscal year, federal funding would be reduced in the following fiscal year. The bill would not affect the underlying obligation on states to provide state funds in order to pull down a federal match.

The target expenditure amount for each state for each fiscal year would be calculated by multiplying a per capita cap for one of five enrollee groups (elderly, blind and disabled, children, expansion adults, and other adults) by the number of enrollees in that category for the year. The per capita cap for each of the groups is based on the 2016 costs per beneficiary in the enrollee group, and would be adjusted based on the growth in the medical care component of the consumer price index for all urban consumers and to account for certain types of non-disproportionate share hospital (non-DSH) and other supplemental payments. It is anticipated that committee amendments would fine-tune the way in which these non-DSH and other supplemental payments are accounted for in the per capita cap formula.

Committee amendments also would allow a state to elect to receive block grants for Medicaid for a period of ten years for either the non-expansion adult population, or the non-expansion adult population and children. Each block grant would be based on the state’s per capita allotment for the applicable enrollee groups for the first year of the block grant election, multiplied by the number of enrollees in each group, and would increase based on the consumer price index for urban consumers for each year of the block grant election. States opting for a block grant approach would have greater flexibility as to eligibility conditions, the benefits they would be required to offer, cost sharing, and the delivery system. Upon the termination of the block grant election, the state would revert to the per capita spending cap system.

H.R. 1628 would eliminate the mandate that states expand Medicaid to childless adults up to 133% of federal poverty level, but would create two optional categories for expansion enrollees and grandfathered expansion enrollees (enrolled as of December 31, 2019 without a break in enrollment). Effective December 31, 2017, it would eliminate states’ option to expand Medicaid and receive enhanced Federal Medicaid Assistance Percentages (FMAP) for such enrollees. Effective January 1, 2020, it would repeal the enhanced FMAP for expansion enrollees, reverting back to the state’s traditional FMAP (i.e., pre-ACA), but the enhanced FMAP would continue to be available for grandfathered expansion enrollees.

H.R. 1628 would also require states to, at least every six months, redetermine the eligibility of Medicaid enrollees who were made newly eligible for Medicaid by the ACA. This could have a significant impact as many of the childless adults who could qualify for Medicaid have intermittent work throughout a year, which could make some of these individuals ineligible on a consistent basis. It would also enhance FMAP by 5% for state expenditures for these redeterminations. Committee amendments would permit states to apply work requirements for certain adults. Such work requirements could encompass a variety of work activities, which are defined in the context of the Temporary Assistance for Needy Families program.

H.R. 1628 would also repeal hospital presumptive eligibility, an ACA concept that currently allows qualified hospitals to immediately, temporarily enroll patients who are likely eligible for Medicaid under the relevant state’s eligibility guidelines. It would also repeal retroactive eligibility, which currently allows for coverage of benefits for a Medicaid enrollee for up to three months prior to the month in which they applied for assistance. Instead, eligibility would be retroactive only to the first day of the month in which the application for enrollment was submitted.

H.R. 1628 would eliminate the Medicaid DSH payment reductions in fiscal year 2020, and would not apply those reductions to non-expansion states. Non-expansion states would also be eligible for certain safety net funding of approximately $10 billion from calendar years 2018 through 2022.

The Senate is now considering H.R. 1628. At this point, it is unclear whether the Senate working group will write its own bill or whether it will work from the House bill. Either way, the bill that passes out of the Senate likely will look significantly different than the current draft of H.R. 1628.

*We would like to thank Felicia Y. Sze, JD, MPH (Hooper Lundy & Bookman PC, San Francisco, CA) and Amy Sanders Morgan, JD (Bass, Berry & Sims PLC, Nashville, TN) for respectively authoring and reviewing this email alert.

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