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CMS Proposes Medicaid Regulations on Coverage, Cost-Sharing

By Mary Agnes Carey, CQ HealthBeat Associate Editor

February 21, 2008 -- The Centers for Medicare and Medicaid Services (CMS) on Thursday released two proposed rule changes that the agency said would give states "unprecedented flexibility" in designing their Medicaid programs.

The changes would allow states to adjust their benefit package to more closely align with beneficiary needs and require increased cost-sharing requirements for enrollees, the agency said in a news release.

"The proposed rules will result in patients having more choices and greater control over their health care decisions," Department of Health and Human Services Secretary Michael O. Leavitt said in a statement.

According to CMS, alternative benefit packages called "benchmark" plans will allow states to offer beneficiaries health care that has the same value as plans being offered to other individuals in the same state. Benchmarks in the proposed rule include the standard Blue Cross/Blue Shield preferred provider option benefit plan offered to federal government employees, state employment coverage, offered by the largest commercial health maintenance organization in the state, or coverage approved by the HHS secretary.

States would be given the flexibility to provide additional benefits, such as dental coverage, and states would have the option of paying part of a beneficiary's health insurance premium at their place of employment so the individual could remain on private sector coverage.

One of the proposed regulations would allow states to change current premiums and cost sharing structures to resemble those allowed under the State Children's Health Insurance Program (SCHIP), but would limit all cost sharing to no more than five percent of a family's income. The proposal would not change existing cost sharing rules for Medicaid beneficiaries with family incomes below 100 percent of the federal poverty level, but individuals with family incomes between 100 and 150 percent may see some cost sharing, while monthly premiums could be charged to individuals with incomes above 150 percent.

David Parrella, the director of the Connecticut Medicaid program and the chairman of the National Association of State Medicaid Directors, said the regulations CMS proposed Thursday represented "a step forward" in giving states flexibility on coverage, but added that CMS "didn't go as far as they could have gone" because the regulations would not create new flexibility options such as for single working adults that states are trying to cover through Medicaid waivers.

Parrella also said that while Medicaid directors would have liked to have see additional flexibility in cost-sharing, "all in all it is a step in the direction that a lot of states have been looking for in terms of being able to design alternative benefit packages" for Medicaid beneficiaries.

The proposed rules would implement provisions of a 2006 budget savings law (PL 109-171) and a 2006 package of popular tax break extensions (PL 109-432), CMS said, adding that the rules are the latest in a series of regulations to implement the Bush administration's "goals of aligning Medicaid more closely with private market insurance and giving states more control over their Medicaid benefits packages."

Some Capitol Hill lawmakers and the National Governors Association have raised concerns about other Medicaid regulations that CMS has proposed, saying they would shift costs to states. As part of Senate debate on an Indian health bill (S 1200), senators approved by voice vote an amendment to block a regulation that would limit Medicaid reimbursement for ancillary services, such as help finding housing and jobs, that states offer to beneficiaries under case management plans. The administration considers the services, many of them non-medical in nature, outside the scope of Medicaid. The regulation is scheduled to take effect March 3.

CMS said the proposed rules issued Thursday are expected to be published in the Feb. 22 Federal Register and will have a 30-day public comment period.

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