CMS Says States Can Adopt the Option When They Want and for As Long As They Want

Federal officials at the Centers for Medicare and Medicaid Services (CMS) have made it even more attractive for states to use the Medicaid option in the Affordable Care Act (ACA) to close a large gap in health insurance coverage for low-income adults. At a conference in Chicago last week, CMS deputy director Cindy Mann said there will be no deadline for states to decide when and if they will exercise that option, and states that initially choose to participate could later drop the new coverage. The ACA provides that the federal government will reimburse states 100% of the cost for covering newly eligible adults from 2014 through 2016, and then a slightly lower rate in subsequent years, with the federal match leveling off at 90% of costs in 2020 and thereafter. For Wisconsin, exercising that option would close a big hole in BadgerCare by giving the state federal funding for nearly the full cost of serving uninsured adults who are low-income (up to 138% of the poverty level) and don’t have dependent children.

As passed by Congress, the ACA would have required states to cover all adults and children up to 138% of the poverty level (starting in January 2014), but the Supreme Court’s ruling makes it an option for states, rather than a requirement. That decision generated new questions that Congress didn’t anticipate in writing the law, such as whether states would have latitude to opt in and out.

The CMS decision to give states lots of flexibility makes it much harder for state lawmakers to reject this opportunity use federal Medicaid funding to close gaps in insurance coverage. They can try it during the three-year period when federal funding will cover all the cost of newly eligible adults, and use that experience to decide if it makes sense to continue to participate as the federal cost-sharing slowly declines to 90%.

Although last week’s CMS statements remove one of the most significant potential hurdles to state approval of the Medicaid option, state officials are still looking for further guidance on other details. A report released early this month by the Government Accountability Office (GAO) concluded that states need additional information to assist in making their decision, and CMS officials told the GAO that new guidance would be forthcoming.

A recent Wisconsin Budget Project analysis reviews the factors Wisconsin officials need to weigh as they balance the benefits and costs of closing the gap in BadgerCare coverage, and it explains why I think it would have a net positive effect for Wisconsin’s budget (as well as for the state’s health care system and economy). 

As an article in Governing explained, state decisions on the expansion could determine whether millions of low-income Americans will receive health insurance. Now that CMS has clarified that Wisconsin can use the ACA Medicaid option on an experimental basis, the decision next year for policymakers in our state should be much easier.

Jon Peacock