NCSL Principles for Medicaid Reform
Approved August 19, 2005
Medicaid has just turned forty. An appropriate time to reflect on where we have been and where we might go. There is much to celebrate over these forty years, yet many challenges remain. Despite our efforts, affordable, quality health care coverage remains elusive for many. We continue to have an underdeveloped infrastructure for the financing and delivery of long-term care services.
Over the years, Medicaid has grown from a welfare program that provided assistance to a limited number of categorically eligible individuals to a health care program that is a critical component of the health care infrastructure of this nation. Medicaid provides back-up support to Medicare and to individuals who for whatever reason cannot find coverage through employer-based health insurance or through the individual insurance market.
As both the states and the federal government struggle to balance their budgets and to support all the critical functions of government, it is important to discuss and review the state-federal Medicaid partnership. The National Conference of State Legislatures (NCSL) is pleased to have the opportunity to discuss Medicaid reform and how the state/federal partnership can be sustained and improved and to explore ways to:
- Provide predictability in program financing and administration;
- Increase flexibility for states with respect to the eligibility process and benefit design;
- Establish a viable and flourishing long-term care system;
- Reform and improve the Medicaid prescription drug program;
- Strengthen the employer-based health insurance system;
- Increase the number of public/private initiatives to expand access to health care and to provide health care and ancillary services to support people with challenging health care needs;
- Improve the coordination between Medicaid and Medicare to improve the effectiveness of care provided by both programs.
Countercyclical Assistance
NCSL urges the Congress to study options to include a provision establishing countercyclical assistance to states within the Medicaid statute. The provision would upon some triggering event, provide additional financial assistance to states during an economic downturn and would revert back to the regular federal-state cost sharing formula when the economic climate improves. This is a complex, but critical component to fiscal security for the Medicaid program. NCSL looks forward to working with Congress and the Administration to identify options and to establish and implement a program.
Intergovernmental Transfers, Provider Taxes and Donations
It is extremely important that states feel confident that the basis for their Medicaid state matching payments can be sustained over the long-term. States must have clear guidelines if limitations on how they generate state Medicaid matching funds are to be imposed. Under current law, states are permitted to use intergovernmental transfers and provider taxes to generate state matching funds. Despite existing law and regulation, questions remain about the circumstances under which these funding tools may be utilized. States have been unfairly criticized for using these legal mechanisms to generate state Medicaid matching funds. NCSL urges the Centers for Medicare and Medicaid Services (CMS) to respect the needs of states for flexibility relative to legislative changes and proposing regulations, and to issue clear and detailed written guidelines regarding department policy on intergovernmental transfers, provider taxes and donations. The current practice of individual state negotiation without written guidelines leaves every state vulnerable to the imposition of sanctions and leaves every state Medicaid program vulnerable to unanticipated budget shortfalls. Changes in law, regulation or guidelines related to intergovernmental transfers, provider taxes and donations should be prospective, not retroactive. Finally, whatever approach is taken, CMS should provide briefings for state legislators and an opportunity for state legislators to provide feedback. This is particularly important when state law changes are needed.
Medicaid Waivers
The Medicaid program should become less dependent on waivers and should provide statutory authority for successful programs developed through the waiver process to be implemented by states through the state plan amendment process. NCSL urges the Center for Medicare and Medicaid Services (CMS) to provide written guidelines for waiver programs to ensure that states are clear on what is expected. NCSL also supports the development of simplified, streamlined waiver applications and an expedited waiver approval process. It is also important to require a strong evaluation component so that successful programs can be identified and replicated by state plan amendment. NCSL supports consideration of utilizing Medicare savings as an offset to comply with budget neutrality requirements.
Phased-Down State Contribution /Medicaid “Clawback”
For the first time, state funds are included as a line item for funding a federal program. In addition, should federal Medicare expenditures exceed certain statutory limits established in the Medicare Modernization Act (MMA), state “clawback” payments may be increased to support the Medicare prescription drug benefit. NCSL vigorously opposes the adoption of the Phased-Down State Contribution provision in the MMA and urges Congress to include this among the MMA issues to receive further review. NCSL continues to support full federal financial support for dual-eligibles. Finally, NCSL urges the Administration and Congress to provide a formal appeals process for clawback determinations that a state believes is in error, since this calculation will determine state payments into perpetuity.
Medicaid in the Territories
The funding for the Medicaid program in the U.S. territories and commonwealths is capped and the program includes a more restrictive set of benefits and services than is provided through the Medicaid program in the 50 states and the District of Columbia. As part of the broader discussion of Medicaid reform, NCSL urges Congress to review the federal partnership with the U.S. commonwealths and territories and to consider funding options that more adequately reflect the needs of the people in these jurisdictions and program changes that would provide services that are more comparable to those provided to similarly situated Medicaid beneficiaries in the states.
Administrative Simplification
NCSL urges the Administration and the Congress to explore ways to simplify and streamline program administration and to be mindful of administrative complexity and burden when developing legislative and regulatory initiatives. It is equally important to provide sufficient lead time for the implementation of new program requirements. This is particularly important when program implementation requires state legislation. NCSL supports continued support for technical assistance to states on some of the complex administrative challenges states face in this program and urges CMS to broadly disseminate findings that might be helpful to other states. Much of this can be accomplished by providing states with additional flexibility regarding eligibility and benefit design.
Ensuring Program Integrity
NCSL supports the use of audits to ensure program integrity. Where states have made honest errors in interpretation, this information should be shared so that other states might benefit. In cases where an infraction was procedural in nature and did not affect the quality of care, medical necessity or the appropriateness of services, NCSL urges CMS to impose compliance on a prospective basis.
Federal Matching Assistance Percentage (FMAP) Changes
When a state FMAP is reduced, it should be implemented over a five-year period.
The federal government should provide more support to states for the Medicaid costs associated with low-income persons enrolled in Medicare. This increased level of support should be provided in conjunction with efforts to improve care coordination and program management between the two programs.
New Care Models
NCSL supports the development of new and innovative models of care that would combine Medicaid and Medicare funding and incorporate care management, managed care, disease management and quality improvement programs. This would include initiatives that would require participation in a care management program for certain individuals. In these new models of care, information sharing between the Medicare and Medicaid programs would be critical.
Medicare/Medicaid Demonstration Project
The current system with both the federal government and the state responsible for providing health care services to the same individuals prevents people from receiving services optimally tailored to their individual needs, causes excessive administrative costs and stifles innovation. The NCSL is receptive to proposals that would divide federal and state responsibilities on a clear basis, probably age of recipient, provided: (1) the division was cost neutral for both federal and state partners; (2) except as provided for in #3, each partner had total responsibility for funding and program design within its sphere of responsibility; and (3) there was a grant-in-aid program for poorer states (those with higher FMAP) to equalize state ability to pay for programs.
Simplify Eligibility Process by Using Income as Sole Criteria
NCSL urges the federal government to give the states more flexibility to streamline and simplify the Medicaid eligibility process reducing the hassle factor for clients and administrative costs. NCSL urges Congress to amend federal Medicaid law to provide states with the option to eliminate categorical eligibility and to base eligibility simply on income.
Improved Flexibility in Benefit Design
NCSL urges Congress to amend federal Medicaid law to allow states to design benefit packages for the populations being served. As an example, this would permit states to develop innovative, non-traditional benefit packages for Medicaid beneficiaries with special needs and to develop other more traditional benefit packages for higher income Medicaid clients where the Medicaid benefit may more appropriately provide coverage similar to coverage available in the private health insurance market.
Early and Periodic Screening, Diagnosis and Treatment (EPSDT) Program
NCSL urges the federal government to provide more flexibility for states with regard to the Early and Periodic Screening, Diagnosis and Treatment (EPSDT) program. Under current law, states have almost no ability to manage this benefit. States should be authorized to utilize tools that other health insurance plans use to provide high quality services but to also control costs. The State Children’s Health Insurance Program (SCHIP), has successfully provided quality health care to low-income children across the nation without the EPSDT mandate. NCSL encourages the Administration and Congress to provide more flexibility to states, but to continue to require states to provide early and periodic screening services recommended by the American Academy of Pediatrics, and treatment recommended by a health care provider for dental issues and recognized as the generally accepted standard of care for children. These services should be made available to children with the state permitted to have a prior approval process. In addition, Medicaid beneficiaries would be permitted to appeal state decisions and to request and be authorized to obtain a second opinion when a service or treatment is denied.
Enhanced Co-Payments, Premiums and Deductibles for Higher Income Beneficiaries
The states should be allowed to impose deductibles, premiums and co-payments on higher income program recipients.
NCSL urges the Administration and Congress to support efforts to increase the use of health information technology in the Medicaid program to: (1) improve safety and quality; (2) control costs (3) simplify program administration; and (4) improve efforts to collect data to evaluate program effectiveness. Medicaid service funds should not be reduced to support these activities. NCSL urges Congress to provide an enhanced administrative match for information technology services.
State Medicaid dollars are increasingly tied up in costly federal litigation. NCSL urges the Administration and the Congress to work with state officials on developing strategies to reduce the volume of litigation by clarifying and simplifying Medicaid statutory provisions that are too vague or too prescriptive for states to properly administer. NCSL also urges the U.S. Department of Health and Human Services to provide technical assistance to states regarding Medicaid services/issues that are the subject of litigation in several states so that states may find ways to successfully provide the services in question without litigation.
Restructure the Medicaid Prescription Drug Benefit
The current Medicaid prescription drug benefit is in transition. The Medicare Modernization Act (MMA) which established the new Medicare prescription drug benefit made a number of changes that will significantly change state Medicaid prescription drug programs. This provides an opportunity to review and revise the existing program. Because of changes enacted as part of the MMA, state Medicaid programs will no longer receive the “best price.” States will also likely find it more difficult to negotiate supplemental rebates. As a result, states must have additional tools to properly manage this complicated and critical benefit. In addition, policy changes regarding the formula used to reimburse Medicaid prescription drug expenditures must be considered. It is important to make certain that all the affected parties are treated fairly and that proposed changes will not compromise patient access. NCSL can only support changes in the Medicaid prescription drug program that would yield at least as much savings to states as is provided for under current law. Finally, states should be explicitly allowed to have a prescription drug only Medicaid option.
Increased State Flexibility in the Management of the Prescription Drug Benefit
NCSL encourages the Administration and Congress to continue to support state initiatives to manage the Medicaid prescription drug benefit that: (1) control costs; (2) improve patient access; and (3) improve patient outcomes. NCSL supports increased flexibility for states to: (1) impose prior authorization requirements as provided for under current law; (2) provide incentives for the use of generic prescription drugs when appropriate; (3) require utilization review; (4) reimburse pharmacists for pharmacy management services; and (5) to participate in multi-state pools to maximize states’ collective buying power. NCSL urges Congress to permit states to charge higher co-payments to higher income Medicaid beneficiaries in the Medicaid prescription drug program.
Financial Accountability in the Medicaid Prescription Drug Program
The current federal requirement for secrecy in Medicaid prescription drug purchasing should be removed to allow the states to make public the prices paid for individual drugs, the rebates received and the resulting net prices paid. Complex financial systems tend to drift out of compliance unless subject to regular audits. The rebate system provided under current law for Medicaid drug pricing is such a system. It should be subject to regular compliance audits either by the U.S. Government Accountability Office (GAO) or by the states acting individually or in cooperation.
The development of a comprehensive long-term care program for elderly and disabled people is critical. Without the development of such a program, long-term care expenditures will continue to overwhelm state and federal health care budgets, limiting needed expenditures for primary and preventive health care. States should be given new options for setting financial and functional criteria to qualify for long-term care services. In addition, NCSL supports the development of expanded options for private long-term care insurance, flexible life insurance products, and home equity sharing programs, such as reverse annuity mortgages. NCSL also supports initiatives to provide incentives to employers to offer and for individuals to establish health savings accounts and other innovative financing options to provide support for long-term care services. Finally, much of the long-term care services provided to individuals today are provided by family members. NCSL supports efforts to assist family members who are caregivers, including tax incentives and programs that provide support services, such as respite care, for family caregivers. It is critically important to acknowledge the important role of family caregivers as part of the continuum of care in the provision of long-term care services and to provide needed support to maintain this important component of our long-term care infrastructure.
Medicaid Long Term Living Flexibility Option/Demonstration Program
Under a new state/federal partnership that uses a new formula for calculating federal funds to be spent in a state for long-term care (alternative formula), a participating state would receive federal funds based on appropriate medical and long-term care services costs, inflation, demographic factors and other appropriate factors, based on a three year rolling average. States, as a condition of receiving federal funds under this option, would be required to establish a comprehensive long-term care program for elderly and disabled individuals. The new optional program would preserve the Medicaid entitlement to states and individuals. Should the amount calculated under the alternative formula not be enough to provide full individual entitlement to services, then supplemental federal funding will be provided to meet those requirements. States would determine eligibility standards and criteria and program benefits. Each state would be required to provide a continuum of long-term care services that would include, but not be limited to: home and community-based care, nursing facility services, nutrition services, home health, hospice, supportive services and adult day care. This approach permits states to offer long-term care services in the most appropriate setting, respecting the preferences of individuals and their families, without the need for time-limited waivers. States could implement the program in a portion of the state during the initial years of program. States would be responsible for submitting a state plan and for periodically reporting program results to the Centers for Medicare and Medicaid Services (CMS). States could decide to end participation in the program, even after implementation with notice to CMS within a certain period of time.
Increasing Options for Home and Community-Based Care
NCSL continues to support the development of more home and community-based options under Medicaid to provide long term care services. States should be encouraged to develop innovative programs to improve the long-term care system. NCSL urges the Administration and Congress to work with states to develop assessment tools that will help states better identify what level of services individual clients need and the most appropriate settings for the client to receive care. These assessments should be made available to all elderly and disabled individuals to help them plan for their long-term care needs.
Long-Term Care Insurance
Recognizing that there is a percentage of consumers who can potentially benefit from the purchase of long-term care insurance, NCSL supports strong federal action to protect consumers of long-term care insurance from predatory pricing or inadequate benefit plans, and to speed the development of long-term care insurance as a viable alternative or complement to Medicaid support for long-term care services. At the same time, tax credits, partnership programs, and other incentives should not be seen as a tool for reduced funding for Medicaid. While the states will continue to take primary responsibility for the regulation of long-term care insurance, NCSL supports the development and evaluation of programs and initiatives that would:
- provide preferential tax treatment for individuals who purchase qualified long-term care insurance;
- provide tax incentives for private employers and a Medicaid bonus program for state and local government employers to encourage the them to offer long-term care insurance as a benefit;
- encourage and provide incentives to employers to offer long-term care insurance, as a condition of receiving federal benefits, such as business tax credits;
- make long-term care in policies portable;
- repeal the provision in the Omnibus Budget Reconciliation Act of 1993 that restricts the ability of states to develop programs that provide limited asset protection and other incentives within the Medicaid program to individuals who purchase long-term care insurance and the establishment of a new, updated “Long-Term Care Partnership” program to encourage more people to purchase long-term care insurance. NCSL urges Congress to study options for establishing reciprocal agreements between states to facilitate the portability of the new partnership products. NCSL also urges Congress to grandfather existing partnership states into any new partnership program.
Premium Assistance for Employer-Based Coverage
NCSL urges the Administration and the Congress to simplify current law provisions that authorize states to provide premium assistance to Medicaid beneficiaries to purchase private insurance. This will enable Medicaid families to purchase coverage and receive health care services from the same health plan as many families who receive there health care coverage through private insurance do. A single medical home for all family members makes it easier for families to plan to receive medical services.
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