The Obama administration answered a key question from governors on Monday with a clear "no": States may not expand Medicaid only part of the way and still get the full federal funding provided in the Affordable Care Act.
The decision, announced by Health and Human Services Secretary Kathleen Sebelius in a letter sent Monday to governors, is significant because after the Supreme Court decision in June made the Medicaid expansion optional, several states have floated the idea of a less generous expansion than called for in the federal health law.
In a letter to governors, HHS Secretary Kathleen Sebelius, shown here speaking at a conference in Washington last week, says states that expand Medicaid must cover people making up to 138 percent of the federal poverty level to get enhanced funding (Photo by Chip Somodevilla/Getty Images).
The health law requires Medicaid to expand in 2014 to cover anyone earning up to 138 percent of the federal poverty level, or nearly $32,000 for a family of four. States have until mid-February to decide whether they will expand or not, and Monday’s decision from HHS means that states will not be able to expand the program up to, for instance, 100 percent of the federal poverty level and still receive the full funding provided by the health law.
Under the law, federal government will cover 100 percent of the costs of the new Medicaid beneficiaries from 2014 to 2017; it then phases down to 90 percent of funding in 2020, with states picking up the rest of the tab. However, the Supreme Court last summer ruled that states could not be compelled to expand their programs at the risk of losing the rest of their Medicaid funding. The Supreme Court decision left many questioning just how flexible the expansion of Medicaid could become.
HHS said the states could seek a waiver in 2017 for a partial expansion. However, states will only be able to get a waiver if they can show they would still be providing similar coverage and benefits as called for under the law. That means a state would have to find a way to cover people up to 138 percent of poverty level if it chooses not to make that group eligible for Medicaid.
Cindy Mann, who oversees Medicaid as deputy director of Centers for Medicare and Medicaid Services, said the health law does not allow the administration legal flexibility to permit a partial expansion while the federal government is paying full cost of expansion. She refused to say whether the decision would limit the number of states that expands Medicaid starting in 2014. “We are optimistic that they (states) will move forward.
In a posting on the HealthCare.gov blog, Sebelius said that “while the law does not create an option for enhanced match for a partial or phased-in Medicaid expansion to 133 percent of poverty, we will consider waivers at the regular matching rate now and, in 2017 when the 100 percent federal funding for the expansion group is slightly reduced, broad-based State Innovation Waivers.”
At least 9 states including Texas and Florida and have said they would not expand Medicaid, because they worry about costs the state would face, particularly when federal funding pares down starting in 2017.
Seventeen states have said they will participate in the Medicaid expansion, according to consulting firm Avalere. Most states are still undecided, and they have no deadline to make a decision.
The Obama administration this summer said states could decide to expand Medicaid in 2014 — with the full federal funding — and then drop it at a later date. But such a decision is politically risky, because state officials don’t want to be in a position of eliminating coverage.
Bruce Siegel, CEO of the National Association of Public Hospitals and Health Systems, said he was thrilled with the decision.
"We are greatly encouraged by the Centers for Medicare & Medicaid Services' decision today to pursue an expansion of Medicaid consistent with the scope of the Affordable Care Act,” he said in a statement. “The agency's guidance follows the letter and spirit of the law and takes an important step toward significantly reducing the ranks of the uninsured.”
"We look to the promise of reform to expand health care coverage as broadly as possible and call on lawmakers to preserve the funding we have."
In her blog post, Sebelius also outlined other points of the guidance being provided to states and gave a conditional nod to exchange plans submitted by Colorado, Connecticut, Massachusetts, Maryland, Oregon and Washington.
Kaiser Health News is an editorially independent program of the Henry J. Kaiser Family Foundation, a nonprofit, nonpartisan health policy research and communication organization not affiliated with Kaiser Permanente.