Sebelius tells governors to follow the money, as she outlines strategies for Medicaid savings

Home 9 Health Care 9 Sebelius tells governors to follow the money, as she outlines strategies for Medicaid savings

On Thursday, February 3, HHS Secretary Kathleen Sebelius sent a letter to state governors outlining “flexibility and federal support available for Medicaid.” The letter doesn’t respond directly to the contention of GOP governors that they should be allowed to reduce eligibility standards. Instead, Sebelius explains the broad flexibility states already have, and she urges that they focus on the main cost drivers of Medicaid spending – services for the elderly, people with disabilities, and children and adults with chronic conditions.

All or nearly all states are struggling with deep deficits in their Medicaid budgets, as the Recovery Act’s enhanced federal funding for cost-sharing dries up. Unfortunately for states, that aid is ending well before their caseloads begin to drop or state revenue rebounds. As a result, many governors have been seeking increased flexibility to change their Medicaid programs, including the authority to reduce income limits and to tighten other financial and non-financial eligibility standards.


The Secretary’s letter and an attachment to it note that long-term care represents the largest share of Medicaid spending and is an important area for states to consider as they develop cost cutting plans. The attachment describes state options in more detail and states that “the elderly and people with disabilities account for 18 percent of enrollees but 66 percent of the costs.”

Some of the broad cost-savings options described by the Sebelius letter include the following:
  • reducing eligibility of adults to 133% of poverty – if the state has a deficit and already offers coverage to adults above that income level;
  • modifying benefits, including eliminating optional benefits;
  • managing care for high-cost enrollees more effectively;
  • purchasing drugs more efficiently; and
  • assuring program integrity.
As the Kaiser Health News reported Friday, the Republican Governors Association isn’t satisfied with the Secretary’s response. They were disappointed that she sidestepped the question of whether states would get relief from maintenance of eligibility (MOE) requirements in the Affordable Care Act (ACA) that require maintaining current eligibility policies for kids until 2019 and for adults below 133% of the poverty level.

Arizona recently applied for a waiver that would allow them to drop coverage for 280,000 people, notwithstanding the MOE standards of the ACA and the Recovery Act. The Sebelius letter says that she will continue to “review what authority, if any, I have to waive” eligibility requirements. Leaving the door open for such a waiver is very worrisome for advocates, but doesn’t go far enough to satisfy conservative governors.

A NY Times article by Robert Pear includes GOP responses to the Secretary’s letter.

A Journal Sentinel article by Guy Boulton does a nice job of putting the subject of the state options and challenges into the context of Wisconsin’s $1.8 billion GPR shortfall for Medicaid in the 2011-13 biennium.

Jon Peacock

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