Editor’s note: The new issue of “Manatt on Medicaid” provides insights into two critical developments. First, we examine a new strategy for financing 12 months of continuous coverage for newly-eligible adults, including implications for stakeholders and procedures for implementation. Next, we look at growing state interest in Medicaid expansion. Summaries of key points are below. To download the full “Manatt on Medicaid” briefings, click here.

The federal government recently issued sub-regulatory guidance that will allow states to receive 98.7 percent to 99.3 percent of the cost of providing 12 month continuous coverage to adults newly eligible for Medicaid in expansion states. In states that adopt the option, not only will consumers benefit, but issuers and providers can expect greater stability in their revenue streams and a greater return on investments in preventive services and care management.

Background

In May of 2013, the Centers for Medicare & Medicaid Services (CMS) issued guidance to states on strategies available to facilitate the enrollment and renewal of eligible people into Medicaid coverage. One strategy provides states the option to seek a Section 1115 waiver to provide 12 months of continuous Medicaid eligibility for adults regardless of changes in circumstances that occur during the year. Though states have had this option for children since 1997, the May 2013 guidance represents the first time that CMS has offered states the opportunity to implement 12 months of continuous eligibility for adults.

Until recently, however, no states had implemented 12 months continuous eligibility for newly-eligible adults, largely due to financing barriers. CMS informed interested states that they could not receive the 100 percent matching rate for 12-month continuous eligibility, but did not yet have details on what the available matching rate would be.

Enhanced Federal Medical Assistance Program (FMAP)

Recently, CMS announced a new, simplified formula for establishing the appropriate matching rate. Drawing on research conducted by George Washington University, CMS determined that 97.4 percent of the cost should be financed at the enhanced matching rate available for newly-eligible adults and the remaining 2.6 percent at a state’s regular Medicaid matching rate. As a result, states will receive a matching rate between 98.7 percent and 99.3 percent for the cost of 12 month continuous eligibility for newly-eligible adults in 2014.1  Click to see state-specific data on the matching rate applicable to newly-eligible adults in states that elect this option.

Implications for Stakeholders 

The new option offers the possibility of greater continuity of coverage for consumers, administrative simplicity for states and enhanced opportunities for issuers and providers to develop stable relationships with enrollees and patients. The potential advantages include:

  • Greater continuity of coverage for consumers
  • More reliable source of revenue for plans and providers
  • Greater potential return on investments in prevention and care management
  • Greater capacity to measure quality
  • Administrative savings for states, issuers and providers

Ultimately, however, it is the states that must decide whether or not to pursue this option.

Implementation Procedures

To take up this policy option, states must submit a Section 1115 waiver to CMS or, if they already have a waiver, they must submit an amendment. As with all Section 1115 waivers, those aimed at the 12-month continuous eligibility option are subject to transparency requirements and must be made available for public comment. However, CMS has advised that it will review these waivers expeditiously and assist states in developing and submitting their applications or amendments.