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Following Arizona: Medicaid Waiver Expirations Could Bring Added Coverage Losses

By John Reichard, CQ HealthBeat Editor

February 17, 2011 – Analysts say a number of states might have the right to pull the plug on some Medicaid coverage to cope with budget woes, after the Department of Health and Human Services (HHS) clarified this week that Arizona could drop 250,000 childless adults from its rolls.

A letter from HHS Secretary Kathleen Sebelius assured Arizona officials that they could drop those recipients without violating the "maintenance of effort" requirement in the health care overhaul.

But determining how many additional people might lose coverage—and in which states—is no simple matter, analysts say. Some states that could end coverage might not be inclined to do so.

The Feb. 15 letter from Sebelius to Arizona Republican Gov. Jan Brewer lists a number of steps federal officials have approved to help Arizona cope with rising Medicaid costs, including dropping dental coverage, podiatrist services, various types of lung, pancreas, kidney, and heart transplants, and limiting hospice and outpatient occupational therapy services. Those types of care are considered optional under Medicaid law.

Sebelius also noted a request by Brewer that the HHS secretary use a specific type of authority to waive compliance with Medicaid rules—Section 1115 demonstration authority—to also set aside the maintenance of effort requirement in the law (PL 111-148, PL 111-152). The "MOE" bars states from reducing eligibility for Medicaid prior to 2014, when everyone with incomes up to 133 percent of the federal poverty level will qualify for the program.

Arizona has a Section 1115 waiver under which it covers 244,000 childless adults in its Medicaid program.

"I do want to make you aware that the MOE provision in the Affordable Care Act does not require Arizona to renew its demonstration as is, beyond its expiration date of Sept. 30, 2011,'' Sebelius said in the letter. "Waivers are time-limited commitments—both for a state and for HHS—and neither the [health care law] nor Medicaid law or regulations prior to its enactment require a state to renew a demonstration beyond its expiration."

Thus Arizona can drop 244,000 people as of that date, and HHS isn't setting a precedent that it is waiving the MOE requirement under the health law.

That also means other states with waivers for expanded coverage that expire before 2014 could also end Medicaid benefits for the populations covered, including tens of thousands of additional childless adults or parents of children in Medicaid.

States covering those populations under waivers include Wisconsin, Maine, Indiana, New York and Vermont, said Judith Solomon, co-director of health policy at the Center for Budget and Policy Priories. But it's difficult to determine which states have waivers that expire before 2014, says Solomon, adding that she has asked CMS to compile a list.

"I would expect that between now and 2014 there would be waivers that expire," but "whether there is any on the horizon I don't know," said Solomon.

"There's very few that are in the same position as Arizona that are expiring and want to cut people off," said Joan Alker, co-executive director of the Center for Children and Families at Georgetown University.

Connecticut and the District of Columbia have extended Medicaid coverage to childless adults. But they did so under a provision of the health care law that permitted them to do so, not through a waiver, Alker noted.

Alker notes that Indiana and Wisconsin both have waivers that expire before 2014. Both states have outspoken Republican governors who want to trim Medicaid costs. Alker said Indiana's waiver expires in 2012 and Wisconsin's doesn't run out until late 2013, just before Medicaid eligibility must be expanded under the health law.

Other states such as New York have expanded Medicaid to cover childless adults but might not be inclined to drop them from the Medicaid program, Alker said.

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