Bush Medicaid Plan May Allow States to ‘Pocket’ Funds

President Bush announced a plan on Aug. 4 that would allow states to "trim" services and raise premiums for some Medicaid beneficiaries and use the savings to provide health coverage for the uninsured, but the AP/Nando Times reports that the proposal may have a "giant loophole." According to HHS officials, states "will not necessarily" have to spend the savings to provide health coverage for residents without insurance, and advocates for the uninsured fear that states may "pocket the savings." Leighton Ku, a Medicaid expert at the Center for Budget and Policy Priorities, said, "Contrary to the way this is advertised, states could reduce benefits and offer either no or a very small coverage expansion so they save state dollars." However, HHS spokesperson Bill Pierce said that he "doubts that states would want to cut benefits without providing new coverage," adding, "States would be under a tremendous amount of pressure if they took benefits away from someone. We're just trying to give them the ability to be as creative as they possibly can." Advocates for the uninsured "argue" that the plan may hurt low-income Americans, and others "wonder which Medicaid participants will see their benefits trimmed." The AP/Nando Times reports that while states must continue to cover those who are categorically eligible for Medicaid, states may require low-income children and their parents to pay more for coverage or reduce benefits, such as prescription drug and dental care coverage. Diane Rowland, executive director of the Kaiser Commission on Medicaid and the Uninsured, said that states may also have to reduce benefits for seniors and the disabled -- the "most expensive people served under Medicaid" -- to "generate enough money to cover substantially more people." The Bush administration will implement the plan, which does not require congressional approval, "immediately" (Meckler, AP/Nando Times, 8/6).

Details Emerge on Bush Plan and Benefit Packages
According to the waiver "application template" from CMS, the type of benefit package that a state can request varies with the type of population covered.

• For "Mandatory" Medicaid populations defined as those populations that must be covered under a Medicaid State Plan Amendment, states must offer "the benefit package specified in the Medicaid State Plan."
• For "Optional" Medicaid populations defined as "those that do not require a section 1115 demonstration to receive coverage and who have incomes above the mandatory population levels," states are provided with a list of six options for benefit plans that can be offered. These options, which are similar to the benefit package options for Title XXI, include the Medicaid benefit package and a health benefit plan that is "offered and generally available to State employees." As one of the options, states can also seek "secretary-approved coverage." Under this option, states are invited to describe the benefits package to be offered.
• For Medicaid "expansion populations," defined as those "who can only be covered under Medicaid and SCHIP through the section 1115 waiver authority," the application explains that "states have flexibility in designing the benefit package; however, the benefit package must be comprehensive enough to be consistent with the goal of increasing the number of insured in the state." States are told that they can "tailor" their own plan while keeping in mind that such a plan "must include a basic benefit package."
• For CHIP populations, the waiver application indicates that states may seek waivers to change the benefit package. More specifically, the application explains that states may seek waivers to, "offer a benefit package that does not meet the requirements of" Title XXI.

Details on Cost Sharing
According to the waiver template's cost-sharing chart, states can request the following changes.

• Mandatory Population: Cost-sharing requirements cannot be waived and must be "the nominal amounts per regulation."
• Optional/Expansion Population, Children: Cost-sharing can be "up to 5% of the family's income."
• Optional/Expansion Population, Adults: Cost-sharing can be set up to a "state-defined" level.
• CHIP: According the waiver application, states can also request to "impose cost-sharing in excess of statutory limits" and "up to 5% of family income."