What`s ahead for Medicaid

Governors, state legislators, members of Congress, providers, and healthcare advocates have used Medicaid to meet a variety of healthcare needs. Indeed, Medicaid fulfills many roles. It is a health insurance program for 25 million children and 14 million adults, most of them low-income working parents. Medicaid is the largest purchaser of long-term care and personal care services for older Americans and the primary payer for community-based mental health services. Medicaid has proven to be a dependable and nimble healthcare program.

Yet not everyone is happy with Medicaid. There are conflicting calls for Medicaid to be more flexible in the services it offers, but more stable in its costs. Congressional budget reconciliation legislation, known as the Deficit Reduction Act (DRA) of 2005, has set the stage for a potentially massive upheaval of Medicaid, affecting both mental health consumers and providers.

The DRA is far-reaching legislation that touches many areas of federal spending and policy, including farm subsidies, student loan policy, Medicare, Medicaid, SCHIP, and others. The legislation passed the Senate only after Vice-President Cheney cast the tie-breaking vote. Because of a procedural move, the DRA had to pass the House twice—the second time it passed by only two votes. President Bush signed it into law on February 8, 2006.

The DRA includes a number of changes to Medicaid. Mandatory provisions include new proof of U.S. citizenship requirements and changes to case management. The legislation also creates a number of options for states regarding cost sharing, premiums, and benefit package design. Each of these changes could disrupt the services offered by community behavioral health agencies to persons with mental illness who qualify for Medicaid.

Proof of Citizenship

Effective July 1, 2006, all persons applying for Medicaid for the first time, as well as persons being recertified for Medicaid, must provide proof of U.S. citizenship. The statute indicates that the primary documents necessary to prove citizenship are U.S. passports or birth certificates. For naturalized citizens, naturalization papers would be accepted. The statute allows some flexibility for other documents and gives the secretary of the Department of Health and Human Services (HHS) some discretion in determining allowable documents. However, the statute indicates that allowable documents must be of a type that requires proof of citizenship when issued, effectively meaning birth certificates or passports.

Under current practice, most state Medicaid programs ask applicants to indicate if they are U.S. citizens and allow self-attestation as proof of citizenship. A state has the ability to investigate if it believes a person is not a U.S. citizen. Legal immigrants must produce written proof of their immigration status, but a recent report by the HHS Office of Inspector General (OIG) found no substantial evidence that illegal immigrants were claiming to be U.S. citizens and successfully enrolling in Medicaid. In fact, the OIG recommended against requiring applicants to produce U.S. citizenship documentation; the OIG suggests that since this is not a prevalent problem, it is not worth the time and money to require proof of citizenship.

For all practical purposes, all 51 million Medicaid beneficiaries will have to produce proof of U.S. citizenship sometime between July 1, 2006, and July 1, 2007, and at every recertification date in the future. There are no exceptions to this requirement. Therefore, persons displaced by natural disasters, persons in nursing homes, the homeless, and persons with serious mental illness all must produce proof of U.S. citizenship. This requirement presents a daunting challenge for Medicaid beneficiaries, as well as for case management staff within community mental health centers, for state Medicaid agencies, and for city and county offices charged with record maintenance.

It is unclear how the Centers for Medicare and Medicaid Services (CMS) will pursue implementation of this requirement. The statute directs the HHS secretary to implement an outreach campaign. It also would be customary for HHS to issue regulation or some other guidance to the states. As of this writing, HHS had not given such direction.

Case Management

Case management is a foundation service within community mental health centers, providing staff and consumers the opportunity to gain access to needed medical, social, educational, and other services. A state can target case management to a particular client population or to particular areas within the state. The DRA offers a new definition of case management services that clarifies their purpose and intent.

The DRA goes on, however, to indicate that case management and targeted case management are only eligible for federal financial participation (i.e., reimbursement) if “there are no other third parties liable to pay for such services, including reimbursement under a medical, social, educational, or other program.” The Congressional Budget Office (CBO) scored the savings for this provision as $760 million over five years. The effective date for this provision is January 1, 2006, and the statute offers an expedited regulatory process for this provision.

There is much concern that the statute's language will be interpreted to mean that if any other medical, social, or educational program can pay for case management services, then Medicaid will not. As of this writing, CMS had not issued guidance.

Benefit Flexibility

Medicaid was designed to include a minimal set of mandatory services that states were required to offer and other services that states had the option to offer. Certain populations had to be enrolled into the program, and states had the option to expand the program within certain guidelines. Statutes governing Medicaid required services to be comparable across the state and across beneficiaries. The Medicaid waiver process allowed states flexibility in both of these areas, but some governors have complained that the waiver process is administratively burdensome.

The DRA provides states with new flexibility regarding the implementation of premiums, cost sharing, and benefit design through the State Plan Amendment process. All of these provisions became effective on March 31, 2006. States now have the option to change their Medicaid benefits package to mirror:

• the Federal Employees Health Benefits Program or its equivalent;

• the State Employees Health Benefits Package or its equivalent;

• the benefits package of the HMO in the state with the largest non-Medicaid enrollment; or

• the actuarial equivalent of any of the three previous plans.

States also can change their Medicaid benefits package to anything that the HHS secretary approves.

According to the CBO, mental health services may be affected by these new scaled-back benefit packages. A variety of other services will continue to be covered but will be restricted in amount, duration, and scope.

The DRA does not require that states offer the same Medicaid benefits statewide, meaning that one part of the state could receive a more comprehensive package than another. States are permitted to define new groups of people who will receive the new DRA benefit package. Certain groups, including special needs populations (such as people with serious and persistent mental illness who qualify for Medicaid because of disability) and people eligible for both Medicaid and Medicare, are exempt from changes to their Medicaid benefits package.

Children under age 19 must still be provided with Early and Periodic Screening, Diagnosis and Treatment (EPSDT). States, however, can include EPSDT children in a new benefit package that they create under the DRA and may offer EPSDT as a “wraparound” benefit, complicating their coverage and making it less likely that children actually will receive the care they need.

Premiums and Cost Sharing

Under the DRA, states are allowed to vary the premiums and cost sharing that they charge by and within groups, by geographic area, and by type of service, effective March 31, 2006. Currently individuals at or below 100% of the federal poverty level (FPL) pay no premiums for services and copayments of up to $3 per service. Under the DRA, premiums and copayments for most services are allowed with no apparent upper limit, possibly due to a legislation drafting error.

Individuals between 100 and 150% of the FPL also currently pay no premiums and copayments of up to $3 per service, but under the DRA they may face cost sharing up to 10% of the cost of most services. This group may be charged up to $6 for nonemergency use of an emergency room.

Individuals above 150% of the FPL face premiums with no limit other than that they cannot exceed 5% of the individual's or family's monthly or quarterly income. In addition, states may implement cost sharing of up to 20% of the cost of most services for this group.

Under the DRA's cost-sharing provisions, states may choose to instruct providers to deny care to someone who does not meet a cost-sharing obligation. States may require prepayment of premiums and terminate Medicaid coverage for someone who fails to pay the premium within 60 days. Providers who fail to collect copays from clients might have their payment for services reduced by the amount of the copays.

What Does the Future Hold?

Each of the DRA provisions discussed in this article has the potential to impede access to necessary mental health treatments and supports for consumers and to impose unfunded mandates on behavioral health providers:

• Citizenship verification requirements likely will result in the loss of Medicaid eligibility for thousands of U.S. citizens, as well as increased use of case management and support staff time in finding and/or obtaining required documentation.

• Shifting the costs of case management services to other local, state, and federal programs undoubtedly will reduce access to this vital service.

• Increasing copays and premiums for low- income individuals will result in less use of care, poor health outcomes, and deferred care. Reducing reimbursement to providers who do not or cannot collect copays, or stopping Medicaid payments altogether for unpaid premiums, is just bad policy.

• Increasing benefit flexibility could result in increased confusion for mental health consumers, family members, and providers, as well as increased administrative costs for provider agencies.

The National Council for Community Behavioral Healthcare continues to work with members of Congress, CMS, and other mental health organizations to mitigate the negative impact of the new law.

Charles Ingoglia, MSW, is Director of Government Relations and Technical Assistance for the National Council for Community Behavioral Healthcare.