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States Try Different Routes to Cut Medicaid Eligibility

By Rebecca Adams, CQ HealthBeat Associate Editor

September 6, 2012 -- Earlier this year, Maine and Illinois officials had a similar goal: to scale back the number of people who were eligible for Medicaid in their states. But each took a different approach, and the outcomes couldn't be more different.

Each wanted to get around rules in the 2010 health care law (PL 111-148, PL 111-152) that require states to maintain, until 2014, Medicaid eligibility policies that are at least as generous as those in place when the overhaul was signed in March 2010. Many states have complained that those "maintenance of effort" rules are too restrictive at a time when state budgets are in turmoil and legislators are looking for cuts. But federal officials say the requirements have prevented millions of people from losing coverage during the national economic downturn.

The health care overhaul provides a way for states to bypass the maintenance-of-effort rules by getting an exception. To get one, state officials have to show that they are facing a budget deficit. They also cannot narrow eligibility for just anyone. State officials can only cut off coverage for adults who aren't pregnant or have disabilities and who have incomes higher than the federal minimum of 133 percent of the federal poverty level, which this year is $19,090 for a family of three.

Both Illinois and Maine could have used this route to drop people from their rolls.

But Maine Republican Gov. Paul LePage proposed more aggressive cuts than those allowed under the exceptions procedure. The state legislature passed a budget that included some of LePage's cuts.

So on Aug. 1, LePage sent the Centers for Medicare and Medicaid Services (CMS) a state plan amendment requesting $20 million in cuts. He asked CMS for a decision by Sept. 1 because the state budget assumed the cuts would take effect on Oct. 1.

When that didn't come, state Attorney General William J. Schneider filed a motion for injunctive relief in the First Circuit Court of Appeals asking that Health and Human Services officials approve the proposed amendment to the state plan or that, until the litigation is resolved, HHS pay Maine's state matching share for the groups that the state wants to cut.

"The First Circuit is expected to act quickly on the motion, but the exact time frame is unknown," said Brenda Kielty, special assistant to the attorney general.

For their part, CMS officials have noted that they have 90 days, and more if they need it, to review Maine's Aug. 1 request.

In the meantime, Illinois officials took a different route. Democratic Gov. Pat Quinn worked with federal policymakers to get an exception and implemented most of the state's proposed cuts on July 1.

Maine's Plan

The question of what will happen next in Maine is leaving state officials, medical providers, patients and others uncertain less than a month before the cuts are scheduled to take effect. The state's Medicaid agency has prepared notices to inform affected Maine residents that they will be cut off the rolls. But those notices have not yet been sent out.

Some of the planned cuts might fit the requirements of the exception provision, said Robin Rudowitz, associate director for the nonpartisan Kaiser Commission on Medicaid and the Uninsured, which is part of the Kaiser Family Foundation. But others do not.

Lowering eligibility limits for people earning 200 percent of the poverty level down to 133 percent of poverty would seem to conform to the rules in the health care law. That change would affect roughly 12,000 people in Maine.

But the Maine plan would impose deeper cuts than what the health care law appears to allow. It would reduce the eligibility income threshold to 100 percent of the federal poverty level. It also would restrict Medicaid coverage for 19- and 20-year-olds and reduce a program that helps seniors and people with disabilities get medical and prescription drug coverage.

It's unlikely that HHS officials will accept all of the proposed cuts, said some health policy experts in Washington.

"If you read the statute, it's hard to see how CMS would approve this request," said Alan Weil, executive director of the nonpartisan National Academy for State Health Policy (NASHP). "There's a lot of money at stake. If a state really pushes the federal government against the wall and says, 'We're going to violate the law,' you'd expect federal officials to come back and say, 'We're not going to permit this.'"

One of Maine officials' arguments is that the June 28 Supreme Court decision invalidated the maintenance-of-effort provisions of the health care law. But CMS officials have made clear that they do not agree. A memo from the nonpartisan Congressional Research Service said the provision appeared to remain in place.

Reductions Also Sought in Democratic States

Republican governors have been the most vocal in complaining about the maintenance-of-effort rules, but Illinois' Democratic governor is one of the few who successfully used the law's waiver process to circumvent them.

The Illinois Medicaid program has historically been more generous than many others around the country, but as the state tried to fill a large budget gap, Quinn deemed it necessary to reduce Medicaid costs.

State officials were able to show that most of the reductions they sought were allowed under the law. About 26,000 adults lost their coverage, said spokesman Mike Claffey.

A few proposals have not yet taken effect because CMS officials have not decided whether they meet the requirements for the exemption. Those left pending include tightening the eligibility for nursing facilities and for supportive living to those who have the least ability to function.

Illinois is not alone in seeking an exception. Hawaii's Democratic Gov. Neil Abercrombie also cut about 3,500 people by getting an exemption and dropping coverage from 200 percent of poverty to 133 percent.

In Wisconsin, Republican Gov. Scott Walker initially sought deep eligibility cuts. But during talks with CMS officials, the states ended up making other changes, such as adding or raising premiums.

In all, 19 states can show that they meet the first part of the test for an exception: that they cover adults over 133 percent of the federal poverty level, according to the Kaiser Family Foundation. Some of those will be facing budget deficits this year, which might allow them to argue that they could avoid the MOE requirements and seek reductions if they want.

However, officials at the National Association of State Budget Officers and other groups said they had not heard of any additional states that plan to seek an MOE waiver.

CMS spokesman Alper Ozinal was asked whether other states have sought exceptions, but he did not provide a list of states.

Weil said states often try to reduce Medicaid spending without touching eligibility, such as cutting rates to providers or adjusting benefits. Given the limited number of states that might qualify for an exception, Weil said he would not be surprised if no others tried to go through the exemption process.

If a state is going to try to restrict eligibility, going through the exceptions process has proven to be more successful than the more confrontational and far-reaching approach that Maine has tried.

But Weil said policymakers are often hesitant to make the decision to tell people who have been getting benefits that they no longer qualify.

"It's a political and a budget decision as to whether your budget is so tight you need to roll back eligibility," he said. "Given the difficult budget circumstances for states, which is part of the criterion for getting approved, I don't think the state's authority to get it is in question. It's the desirability of doing it that's in question."

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