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11-12-2012 | Article

Funding is all-or-nothing for Medicaid expansion


HHS memo

medwireNews: The Obama administration has detailed the conditions that states must adhere to if they are to expect full federal support for Medicaid expansion. A highly anticipated clarification was provided in a memo sent by the Health and Human Services (HHS) Secretary Kathleen Sebelius to all governors declaring that states must expand Medicaid to cover residents who earn up to 133% of the federal poverty level (FPL), otherwise they will not receive any federal matching funds to help enlarge the state-federal program for the poor and disabled.

The HHS communication is a collection of answers to questions that have arisen as states prepare for exchanges, market reforms, and the optional Medicaid expansion.

In a letter written last week, 11 republican governors attempted to negotiate with the administration by requesting that individual states be granted greater flexibility in how they "innovate and tailor to the [health] needs of their citizens." The request ultimately sought a more gradual expansion that would allow, for example, coverage to reach those with incomes up to 100% of the FPL, while still obtaining full federal funding.

The current HHS memo stipulates in clear terms that federal funds follow an all-or-nothing rule. "The law does not provide for a phased-in or partial expansion. As such, we will not consider partial expansions for populations eligible for the 100 percent matching rate in 2014 through 2016."

As specified under the Affordable Care Act (ACA), the government will pay the entire cost of a newly eligible Medicaid recipient for the first 3 years, and this contribution, the "federal match," will reduce to 90% by 2020.

States will still receive federal funding for partial Medicaid expansion, including a "regular" federal match rate ranging from 50% to 78%. "The Supreme Court decision has made the higher matching rates available in the [ACA] even more important to incentivize states to expand Medicaid coverage," the memo said.

The health law that was passed in 2010 originally planned for 17 million Americans to have access to Medicaid by 2014, with the federal government paying for the transition. But last summer's Supreme Court decision making Medicaid expansion optional has resulted in many states considering varying degrees and ways of expanding coverage.

While there is no set deadline for states to decide on whether to expand Medicaid, they have until the end of this week to submit blueprints for health exchanges.

By Peter Sergo, medwireNews Reporter