Following a crescendo of news reports of states looking at possible cuts to their Medicaid program, including 'a report' this week from MICmonitor, Health and Human Services Secretary Kathleen Sebelius yesterday sent a letter to governors outlining what she described as  “flexibility and support available to states” in dealing with their respective budget crises.

“In light of difficult budget circumstances, we are stepping up our efforts to help you identify cost drivers in the Medicaid program and provide you with new tools and resources to achieve both short-term savings and longer-term sustainability while providing high-quality care to the citizens of your states,” Sebelius wrote in the letter. “We are committed to responsiveness and flexibility, and will expedite review of state ideas.”

Under the American Recovery and Reinvestment Act of 2009, (ARRA), commonly known as the stimulus bill, the federal government picked a larger share of Medicaid costs to help states struggle through the continuing recession.

In a news release outlining the Secretary’s letter, HHS noted that over the past two years, states received additional federal support to manage their Medicaid programs through an enhanced federal match for Medicaid (known as the Federal Medical Assistance Percentage or FMAP).  At the request of many governors, the enhanced FMAP policy was extended through June 2011, noted HHS.

The letter also outlines the substantial flexibility that states have to design benefits, service delivery systems, and payment strategies, without a waiver.  In 2008, roughly 40 percent of Medicaid benefits spending, $100 billion, was spent on optional benefits for all enrollees, with nearly 60 percent of this spending for long-term care services, notes the Secretary.  In addition, the letter describes new initiatives that HHS will pursue with states, and offers state-specific technical support.

Some key areas of potential cost savings include the following:

• Changing Benefits. States can generally change optional benefits or limit their amount, duration or scope through an amendment to their state plan.  In addition, states may add or increase cost sharing for services within limits.

• Managing Care for High-Cost Enrollees More Effectively. Just 5 percent of Medicaid beneficiaries account for more than half of all of Medicaid’s costs.  These individuals often have fragmented care that contributes to higher costs.  A new option to provide “health homes” to people with chronic illnesses, and initiatives to reduce unnecessary hospital readmissions, are just some of the strategies that can help improve care and lower costs.

• Purchasing Drugs More Efficiently. States have broad flexibility to set their pharmacy pricing. HHS will create a first-ever national database of actual acquisition costs that states can use to determine state-specific rates.  HHS will also share proven approaches that states have used to drive down costs. 

• Assuring Program Integrity. States will be able to use federal audit contractors to save funds and consolidate auditing efforts and will benefit from new, cutting-edge analytics, like predictive modeling, being developed to prevent fraud in the Medicare program. HHS’ Medicaid Integrity Institute is preparing a series of webinars for states to share best practices for assuring program integrity.

Tax Relief for Medicaid and CHIP

In a related issue, the Center for Medicaid, CHIP and Survey & Certification (CMCS) yesterday said the tax refunds and advance payments are not to be counted as income when determining eligibility under Medicaid or CHIP for the recipient of the payment, or for any other individual.

The bulletin stated that, in addition to not counting the refund or payment as income to the individual, any payment made is not countable as income when determining Medicaid or CHIP eligibility for a spouse or other family members. Tax refunds and advance payments may not be counted as income to someone else even if they are given to that person. Further, the bulletin stated, that the provision also applies to “209(b) States” that use more restrictive Medicaid eligibility criteria than are used by the Supplemental Security Income (SSI) program.

Tax refunds and advance payments are not counted as an available resource for a period of 12 months following the month of receipt of the payment, according to the bulletin, which also noted that during the time a payment is exempt from being counted as a resource to the individual, it also is not countable as a resource to anyone else. The bulletin went on to state that, under Medicaid, this also applies in 209(b) States. However, if any portion of the payment is still retained by the individual after the 12-month period expires, that portion then becomes a countable resource for both Medicaid and CHIP.  

HHS letter can be found at this link:  http://www.hhs.gov/news/press/2011pres/01/20110203c.html

To read article entitled, "States Look to Medicaid to Stop Hemorrhaging," please click here