Stretching Out or Cramping Up? The Impact of State Medicaid Flexibility Families USA Conference January 25, 2008 Judith Solomon, Senior Fellow

Overview Deficit Reduction Act of 2005 gave states: –Flexibility to vary benefits provided to different groups of beneficiaries –New authority to impose premiums and other cost-sharing Focus on benefits flexibility –What can states do? –What have they done? –Whats next?

Proponents argued that benefits flexibility would: Provide states with flexibility to tailor benefit packages to meet the needs of different groups –Otherwise need waiver of comparability and statewideness requirements Save money –CBO expected $1.3 billion in savings over 5 years and $6 billion over 10 years Make Medicaid look more like private coverage –Same benchmark benefit packages as SCHIP –CBO predicted most states would use state employee plans as benchmarks

Benefits Flexibility: What Passed? Limited to children and parents –Seniors, people with disabilities and some children exempt Limited to eligibility categories covered by state at time of enactment EPSDT must be guaranteed through wraparound coverage

CMS Guidance Expanded ability of states to provide benchmark benefits to exempt groups on a voluntary basis –Exempt groups could opt-in to benchmark benefits on a voluntary basis and opt-out at any time –Raised concerns as to whether opting in truly voluntary Broad definition of Secretary-approved coverage –Any other health benefits coverage that the Secretary determines...provides appropriate coverage for the population proposed...

Benefits Flexibility So Far: 8 State Plans Three Groups of States –Waiver States oID, KY, WV, SC are using benefits flexibility as substitute for waivers that the states were planning when DRA enacted –New Benefits States oKS, VA, WA are using benefits flexibility to target additional benefits to people with disabilities and chronic conditions –Expansion States oWI (and more states to come) expanding coverage and providing different benefits to newly eligible beneficiaries

West Virginia Covers children and parents Basic and enhanced benefits packages for each Enhanced benefits contingent on signing member agreement with health goals Goal of improving health by increasing preventive services and provider engagement –Low take-up on enhanced benefits Serious concerns among advocates –Access to mental health services –Impact on EPSDT

Kentucky and Idaho Different plans for different groups of beneficiaries –Healthy –People with chronic conditions and disabilities –Duals and people needing long term services Questions –How do you move between the plans –Does this save money, increase quality or efficiency?

South Carolina State moved from broad waiver proposal to small pilots –Health Opportunity Account –HSA Benchmark Benefits 500 participants for each pilot on a voluntary basis in one county Questions –Who will enroll? –Will this save money especially given increased administrative costs?

Kansas, Virginia and Washington KS: Provides additional benefits (personal assistance services, independent living counseling, other assistive services) for working people with disabilities VA and WA: Providing disease management programs for certain conditions (e.g. diabetes, asthma) on a voluntary basis

DRA Benchmark Benefits: Whats Next? Expansion States: WI and others to come –Expand coverage for parents, pregnant women and/or children oWI – pregnant women – 200 to 250% of the poverty line –Provide higher-income beneficiaries with benchmark benefit package through health insurance pool or other mechanism for expanding coverage –Avoids budget neutrality that would be needed through waivers

DRA Benchmark Benefits: Improving the Process Process of adopting State plan amendments varies by state as to advocacy, input and legislative involvement CMS leaves it to the states –But see GAO report on federal process for waivers No evaluation requirement

Concluding Observations Impact of tailoring benefits questionable –KY report suggests it does not save money –Low take-up in WV with reduced benefits to children and parents Several surprises –CMS guidance allowing exempt groups in –Use of provision to expand benefits to exempt groups –Potential use in state expansions Not likely will end up saving federal dollars