CMS: Partial Medicaid Expansions Not Eligible for Increased Matching Funds

The Affordable Care Act mandates all states expand their Medicaid enrollment to 133% of the Federal Poverty Level (FPL), or risk losing all federal matching funds for their Medicaid program. However, in June the Supreme Court ruled the Medicaid expansion mandate unconstitutional, stating that existing Medicaid funding cannot be withheld; essentially making the Medicaid expansions a voluntary decision for states.

The increased matching funds associated with the expansion will be difficult for many states to pass up as the federal government will pay 100% of the costs associated with the new enrollees for the first two years.  The ACA appropriates additional matching funds for states choosing to expand their Medicaid rolls beginning in 2014.  From 2014-2016, federal matching funds for new enrollees are 100% of costs, the matching rate slowly decreases to 90% in 2020. An estimated 16 million Americans will be newly eligible for Medicaid if all states choose to participate in the program.  To date, seventeen states have announced they will expand their Medicaid enrollment beginning in 2014. Nine have announced they will not move forward with the expansion. Many other states remain undecided, awaiting additional guidance from CMS and citing uncertain federal matching funds in future years.

Many governors across the country had delayed taking action on voluntarily expanding their Medicaid enrollment to 133% of the FPL, choosing instead to await the outcome of the Presidential election before moving forward. With the election now over and the Affordable Care Act seemingly here to stay, we have seen a flurry of activity from governors seeking additional guidance and clarification from CMS on anticipated future costs and the uncertain nature surrounding increased federal matching funds after the initial expansion period.

The Obama Administration announcement yesterday tells states who wish to only partially expand their Medicaid rolls (not to full 133% FPL) will not receive the higher federal matching funds for the new enrollees. States choosing a partial expansion would be eligible for standard federal matching rates for their state. This decision essentially makes the Medicaid expansion an all-or-nothing proposition for the remaining 24 states that are still undecided.

CMS also announced they would not push for a “blended rate” for Medicaid funding as part of the negotiations over the “fiscal cliff” currently hovering over Washington DC.  Not advocating for a blended matching rate is seen as a message to governors that increased matching funds on new enrollees will continue after 2020, but there is no guarantee the increased funding will continue after the initial period.

HHS Secretary Kathleen Sebellius, in detailing the announcement, provided the following information on available waivers to the decision released earlier this week stating, “while the law does not create an option for enhanced match for a partial or phased-in Medicaid expansion … 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.” The announcement makes clear that states can enter or leave the expanded Medicaid option at any time, and, beginning in 2017, states can apply for increased federal matching funds.

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