So you want to privatize Medicaid? Has HHS got a guide for you.

March 29, 2013

States have lots of questions about whether they can use Medicaid expansion dollars to buy private insurance coverage, the so-called Arkansas option. Now, they have a few more answers.

The Centers for Medicare and Medicaid Services on Friday issued a Q&A to address some of the questions posed by states. It's not comprehensive—it includes three questions that span two pages—but it has a few new details that might help states make up their minds.

"It's a constructive contribution that really lays out the parameters and gives a clear message on what proposals Medicaid will or won't consider," says Georgetown's Joan Alker, who specializes in Medicaid policy. "The kind of premium assistance described in the Q&A is clearly the one that they want to see from states."

The full document is below, and here are a few key highlights.

A partial expansion isn't on the table. No, really. Health and Human Services want to make 100 percent clear: States cannot use this option to provide Medicaid to some of the expansion population and not others. "States that wish to take advantage of the enhanced federal matching funds for newly eligible individuals," the document says, "must extend eligibility to 133% of the federal poverty level (FPL) by
adopting the new adult group." Case closed.

A waiver might be in order, though. When Arkansas Gov. Mike Beebe began discussing this idea of using Medicaid expansion dollars to buy private coverage, he was insistent that it wouldn't need a waiver from the federal government. This new document suggests things might be a bit trickier than that.

States can move forward without a waiver, but only if they want to make private insurance an option, not a requirement. "Under the statutory options in the individual market," the memo says, "beneficiaries must be able to choose an alternative to private insurance to receive Medicaid benefits."

If states want to make private coverage a requirement, then they might be looking at pursuing a federal waiver for a new flexibility. That comes from this bit here: "Under section 1115 of the Social Security Act, the Secretary may approve demonstration projects that she determines promote the objectives of the Medicaid program. HHS will consider approving a limited number of premium assistance demonstrations since their results would inform policy for the State Innovation Waivers that start in 2017."

Why does that matter? Waivers tend to be complex matters, where states ask for permission to run their Medicaid program differently than other states. Some can take years to negotiate although, with 2014 right around the corner, these premium assistance waivers might move a little faster.

Benefits need to be comparable. Perhaps the most notable point in the Medicaid memo is a bit on the requirement to offer Medicaid beneficiaries the same coverage in a private insurance plan, as they would have in the public program. This could include things like assistance getting a ride to a doctor's appointment, a Medicaid benefit that doesn't tend to show up in the commercial market.

Medicaid says that, in order to move forward, states need to make sure that the private plans will provide just as good coverage as the public one. The private plans will need to provide "wrap around benefits" to make their product look more like Medicaid. Do private plans want to do that? It's an open question, one of many going forward on this policy.

http://www.washingtonpost.com/blogs/wonkblog/files/2013/03/FINAL-Medicaid-premium-assistance-FAQ-3-29-13.pdf

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Neil Irwin · March 29, 2013