The Future of Medicaid Secondary Payer Reporting Regimes (Part I) – The Federal-State Medicaid Partnership and the ACA

From the outset, I need to credit Mary Re Knack and David Farber for an excellent webcast they did on this subject on Oct. 1, 2013.  I subscribed to it even though I’ve got all of my general CLEs for the reporting period (though if anyone knows of any interesting ethics CLEs, I’d appreciate the heads-up).  I wasn’t disappointed.  It was hugely informative, and in main part, it’s the impetus for this series of posts.

So what is the federal-state Medicaid partnership and how has that arrangement been affected by the Affordable Care Act (which everyone calls the ACA)?

Medicaid is a program designed to help poor families and individuals.  It has federal and state components.  But how does that work?  The federal government (through the Centers for Medicare and Medicaid Services, which everyone calls CMS) tells the states the minimum groups that they must cover if they want to participate in Medicaid, and it identifies certain other groups that the states can elect to cover if they want to.  CMS also sets the mandatory and optional benefits that must (or may) be provided to eligible beneficiaries.  In exchange, the federal government provides a good chunk of the funding for the state Medicaid programs – anywhere from 50 percent up to 75 percent depending on the state.  Although a state theoretically could opt out of Medicaid, in practice, none have.

Each state that participates in Medicaid (again, all of them) is required to establish a “single State agency” to administer and supervise the state Medicaid plan.  In Colorado, that’s the Department of Health Care Policy and Financing.

The precise mechanics of the Medicaid reimbursement process are a bit complicated, but in general, a state will file a statement once a quarter that estimates its total Medicaid costs and certifies that it will be able to come up with its share of those expenses. Then the federal government hands over the matching funds.  At the beginning of the next quarter, the state files a reconciliation statement detailing what it actually spent.  CMS will adjust its payment of the matching funds for that period based on whether it owes (or is owed) additional money.  Trust me, you’ll see why this is important a couple of posts from now.

In addition to the traditional Medicaid-eligible populations and covered services, states are allowed and encouraged to experiment with test programs, called “waiver” programs (because states must get a waiver from CMS before implementing them).  For example, one typical waiver program is Colorado’s Children’s Waiver, which is designed to provide home-based care for physically disabled (but not mentally or behaviorally disabled, as the Colorado Court of Appeals has said) children who would otherwise be at risk of institutionalization in a nursing facility or hospital.

Enter the Affordable Care Act, aka Obamacare.  Among its many moving parts, it included an expansion of Medicaid eligibility to anyone under age 65 making less than 133 percent of the poverty level, regardless of whether they have children or a disability (in most states, childless, nondisabled adults were flat-out ineligible for Medicaid).  This is a pretty drastic expansion of the program, increasing the state rolls by more than 20 million, or about a third of the pre-expansion population.  In return, the federal government will pay 100 percent of the increased Medicaid costs until 2016, with the state share increasing to no more than 10 percent by 2020.

Originally, participation in the Medicaid expansion program was tied to a state’s ability to offer Medicaid in any form.  This means that if a state declined to expand Medicaid eligibility as contemplated by the ACA, it would lose all Medicaid funding.  However, the U.S. Supreme Court put a stop to that in its monumental 2013 National Federation of Independent Business v. Sebelius decision.  There, the court held that conditioning all federal Medicaid funds on a state’s decision to accept the ACA expansion was too coercive to pass constitutional muster, and it required the federal government to permit states to opt out if they so chose.  To date, more than half of the states have chosen to do just that.

Where does that leave us?  State-federal Medicaid partnership, check.  Federal matching funds, check.  ACA Medicaid expansion, check.  But what does that have to do with the Medicaid secondary payer reporting regime?  Stay tuned.