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CMS Confirms Plan to Restrict Medicaid Expansions

By John Reichard, CQ HealthBeat Editor

January 4, 2008 -- The Centers for Medicare and Medicaid Services has quietly begun applying a controversial directive limiting expansion of the State Children's Health Insurance Program (SCHIP) to state proposals to expand Medicaid coverage to children.

The new policy, implemented without obtaining congressional approval or going through the federal notice-and-comment rulemaking process, apparently blocks states from extending Medicaid coverage to children in families with incomes above 250 percent of the federal poverty line without first showing that 95 percent of those eligible below 200 percent of poverty have been enrolled in the program.

That standard is impossible to meet, according to advocates for wider government coverage of uninsured Americans with modest incomes. They emphasize the difficulty of locating all of those eligible for enrollment and shepherding them through a sometimes bewildering and frustrating enrollment process. "It's essentially imposing the income ceiling through the back door," said Cindy Mann, executive director for the Center for Children and Families at the Georgetown University Health Policy Institute. Mann supervised federal Medicaid coverage of children and families and the SCHIP program in the Clinton administration.

CMS announced the standard as it applies to the State Children's Health Insurance Program (SCHIP) in an Aug. 17, 2007, letter to state officials that does not mention Medicaid expansions. That the letter is now being applied by CMS Center for Medicaid and State Operations Director Dennis Smith to state proposals to expand Medicaid coverage above 250 percent of poverty was first made evident by a Dec. 20 CMS letter to Ohio state officials, Mann said.

"This is the first time that Dennis has articulated his policy that the Aug. 17 letter applies to Medicaid," a CMS spokeswoman said.

The New York Times reported Friday that CMS has used the tighter criteria so far to block proposals by state officials in Ohio, Louisiana, and Oklahoma to expand coverage to up to 300 percent of the poverty line. Mann said Wisconsin also wanted to go up to 300 percent of poverty but scaled its expansion back to 250 percent.

David Parrella, who heads the Connecticut Medicaid program, said Friday that his state also intended to extend Medicaid coverage to children in families with incomes up to 300 percent of poverty.

Mann described the policy as generally one that tries to stop any state from covering children above 250 percent of poverty in SCHIP or the Medicaid program. Twenty three states are affected by the policy, she said; 14 that already have covered children above 250 percent and that have been given until August to come into compliance with last year's Aug. 17 letter, and 9 states whose legislatures had approved plans to go above 250 percent and will not be able to obtain CMS approval.

Parrella, who also heads the National Association of State Medicaid Directors, said states, until now, have been able to expand their Medicaid children's coverage to essentially whatever percentage of the poverty line they wanted to fund. Both states and the federal government share the costs of the Medicaid program. "It's an extraordinary departure from 20 years of law," Mann said of the new policy. Administration officials express concern that going above 250 percent of poverty crowds private coverage out of the marketplace.

Parrella said state Medicaid directors would oppose the new policy and said legislative attempts to do so are likely. Asked whether a court challenge is likely, he said "it's hard to say. Individual states may or may not decide to do that."

However, Leighton Ku, a Medicaid analyst for the Center on Budget and Policy Priorities, noted that legislative attempts to overturn the Aug. 17 directive as it applies to SCHIP have failed to obtain congressional approval. Ku added, "many people believe that the Aug. 17 letter in the first place was not legal." But getting a court to block the letter and its application to Medicaid would be a slow process, he said.

Congress is still out of session, but some lawmakers quickly criticized the policy.

"With more than 46 million currently uninsured, state efforts to protect the health of more low-income citizens should be encouraged, not blocked," said Rep. John D. Dingell, D-Mich., in a statement. "Instead, the Bush administration has again chosen to prevent states from providing affordable coverage to more uninsured children. The restrictions the administration is imposing—on both SCHIP and Medicaid—are arbitrary, shameful, and harmful."

An aide to Senate Finance Committee Chairman Max Baucus said the Montana Democrat "is watching closely to make certain that CMS does not block access to health care for poor, uninsured Americans who are eligible for Medicaid and who desperately need the doctor's visits and care the program provides. Restrictions on state efforts cannot be inconsistent with current law, or pursued outside appropriate administrative and legislative channels."

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