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Maryland: Increasing Adult Eligibility While Cutting the Budget

In addition to using innovative outreach strategies to enroll children in Medicaid and CHIP, Maryland recently began expanding Medicaid coverage to low-income parents and expanding health benefits to low-income childless adults as part of a larger set of health reforms aimed at reducing the number of uninsured, improving the quality of care, and containing costs. However, the economic crisis and Medicaid budget cuts have resulted in delays in some expansions as well as rate cuts to providers.

"Expanding coverage is a top priority of the governor and the legislature," said Tricia Roddy, director of the Planning Administration for the Medicaid program, Maryland Department of Health. "When the revenues are there again, there is a commitment to move forward."

Through Maryland's 2007 Working Families and Small Business Health Coverage Act and with Medicaid Section 1115 waiver approval, the state increased Medicaid eligibility for parents from about 40 percent up to 116 percent of the FPL ($21,240 for a family of three in 2009) in July 2008. In its first year (through June 2009), an estimated 48,000 parents enrolled.

The Act also called for expanding benefits in its Primary Adult Care Program (PAC), which had provided limited pharmacy, primary care, and some mental health services to childless adults up to 116 percent of the FPL (about $12,000 annual income). This expansion is covered by the same waiver as the eligibility increase for parents. In January 2009, PAC added emergency room and substance abuse services. The planned addition of a broader range of physician services has been delayed due to severe budget pressures. The Act also calls for adding outpatient hospital services benefits in year two and inpatient services in year three, although implementation will depend on economic conditions. PAC currently enrolls about 30,000 adults, far from the program's cap of about 58,000. "We expect real growth when the program adds the complete complement of services," said Roddy.

The state also began offering premium subsidies to small business employers and workers to enroll in private plans. Employers with two to nine employees whose average wages are below about $50,000, and that have not offered their employees insurance coverage in the past year, are eligible for subsidies that are shared between the employer and employee based on each one's contribution to premiums. Subsidies are provided up to $2,000 per employee or half the insurance premium, whichever is lower, and enrollment is being capped to limit the state's overall spending to $15 million. In order to participate, employers must be willing to provide health insurance that includes benefits encouraging wellness and prevention, and that meet requirements to ensure that employees' contributions are not taxed.

As part of a set of health system reforms, Maryland created the Maryland Health Care Quality and Cost Council to coordinate and make recommendations on health care quality improvement and cost containment initiatives, and to promote medical homes and health information technology.

Financing Challenges
The Act's coverage expansions were financed in part with a one-time transfer of $75 million from surpluses in the Maryland Health Insurance Plan (the state's high-risk pool) and a 2 percent tax on managed care organizations. To fund the expansions on an ongoing basis, the state is using a hospital assessment that is intended to capture savings to hospitals as uncompensated care declines. The assessment provided $40.7 million for FY 2009.

At the same time, the economic crisis has led to reductions in the state's Medicaid budget by about $89 million in FY 2009, and more than $200 million in FY 2010. Because coverage levels must be maintained as a condition to receive federal stimulus funds under the American Recovery and Reinvestment Act of 2009, the state has been forced to cut Medicaid provider payment rates. The rate cuts are affecting a variety of providers, including physicians, hospitals, and nursing homes.

The rate cuts for physicians are not haphazard or across-the-board. Rather, an existing advisory group that examines rates each year has identified Medicaid codes that are expected to be able to sustain cuts. (This advisory group is separate from the Cost Council discussed above.) Medicaid continues to maintain higher rates for pediatric and obstetric services (100% of Medicare rates), as well as for areas with limited numbers of specialists. Providers expect to return to prior levels once the economic situation improves. So far, there is no evidence of erosion in access to services resulting from the rate cuts, although it is difficult to tell whether providers in networks are not taking on new Medicaid patients. The state will continue to closely monitor Medicaid office visit wait times and member hot lines for any negative effects.

For more information

Contact: Tricia Roddy, director of the Planning Administration for the Medicaid program, Maryland Department of Health, [email protected]
For information about the Working Families and Small Business Health Coverage Act, see:

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