The House Energy and Commerce committee came out with their reconciliation mark-up. This committee has quite a bit of jurisdiction including responsibility for Medicaid and the CHIP program for kids. The health finance, coverage and insurance portion of the bill is only 36 pages and it has some big policy proposals.
- No beneficiary cost sharing and federal financing of all Medicaid administered/covered COVID vaccines.
- Option for states to extend Medicaid eligibility that derives from pregnancy from the current 60 days post-partum to a year
- Standard federal financing (FMAP)
- Allows for people who are to be released from incarceration to become Medicaid eligible 30 days before their release dates
- Big deal in reducing transitions of care and discontinuities of medication and treatments due to financing problems
- Paying states to expand Medicaid with a 5% FMAP bump for Expansion Medicaid for 8 quarters
This last piece is fascinating.
Right now the Medicaid program from a state financing perspective can be thought to have two main components. The first is Legacy Medicaid. This is mostly Medicaid as it was structured in 2009. Legacy Medicaid covers pregnant women, aged, blind and disabled, low income kids, long term services and supports and nursing home room and board for dual eligible individuals as well as a a few other eligibility groups. There are income and often asset limits.
Legacy Medicaid is a big line item in any state budget. In Fiscal Year 2019, North Carolina spent $3.8 billion dollars in state funds on Legacy Medicaid. The state pays a share and the federal government pays a share. The federal share is known as FMAP. FMAP is a function of the state’s wealth and income. North Carolina’s baseline split with the federal government for Legacy Medicaid is about 1:2. Massachusetts has a 1:1 split with the federal government while Mississippi has a baseline split of almost 1:3. During the COVID public health emergency, the federal government has enacted an across the board 6.2% point increase in the federal share for Legacy Medicaid. Federal dollars replace scarce state dollars. It is a means to deliver financial relief to state government budgets which are structurally challenged from borrowing to finance counter-cyclical and disaster relief spending.
We also have ACA Expansion Medicaid. Expansion Medicaid is voluntary due to the Supreme Court’s 2012 NFIB v Sebelius decision. Expansion Medicaid covers otherwise ineligible folks who earn up to 138% of the Federal Poverty Level (FPL). The federal government started paying 100% for Expansion Medicaid in 2014. It now pays 90% of the costs. From a state budget perspective, Expansion Medicaid is almost to completely cost neutral as states are able to recategorize enough beneficiaries from other healthcare programs to be part of expansion Medicaid that the state spend on new enrollees is balanced by the transfer of people from programs that were 25%, 35%, 50% or 100% state spend to a program that is now 10% state spend.
The House E&C committee proposes to pay hold-out states an enhanced FMAP of 95% for eight quarters for the ACA after they expand Medicaid. There have been several other proposals in Congress over the past eight years to incentivize states to expand Medicaid. Any of those proposals, including the latest from E&C, makes Expansion extremely likely to be state budget neutral if not state budget positive.
If this mostly makes it through the Senate, the offer has to be tempting to at least several of the hold-out states.