Medicaid — What Role Should Legislatures Play in Reform?

Recently, Senator Mark Kirk (R-Ill.) took CMS to task for notifying the Illinois Department of Health and Family Services (DHFS)  that certain verification requirements  in the state’s Medicaid reform law don’t comply with federal maintenance of effort requirements.  The Illinois law, signed by Governor Pat Quinn in January, requires Medicaid applicants to provide documentation of Illinois residence and at least one month’s income beginning July 1st. The same requirement would apply to current beneficiaries whose eligibility is reviewed beginning October 1, 2011.  The law provides for verification with pay stubs or other records of income and also requires DHFS to establish or continue arrangements with other government agencies for electronic verification of eligibility.

Reasonable people may ask, as the senator did, “What’s wrong with making folks who want government benefits prove they’re eligible?  Why would the federal government want to keep us from preventing fraud?”

Oversimplification is never helpful.  Let’s look at what maintenance of effort means. Section 2001(b)(1) of the Patient Protection and Affordable Care Act (P.L. 111-148)  as amended by the  Health Care and Education Reconciliation Act (P.L. 111-152) provides that states shall not use standards, methodologies or procedures to determine Medicaid eligibility that are more restrictive than  they were on the date the law was enacted (March 23, 2010) until the health insurance exchanges are up and running.

CMS’ understanding of the law is that states may not make it harder for individuals to qualify for  Medicaid than it was on March 23, 2010.  If Illinois had required documentation of one month’s income on that date, there would be no problem with continuing the requirement.  CMS’ letter to the state says that the state may not place any additional  burden on applicants or beneficiaries than before.  However, the legislation also provided for electronic verification of income and residence.  The Illinois agency’s request specified electronic  data available both for income and for residence.  CMS’ letter states that electronic verification would not violate the maintenance of effort requirements.

CMS also suggested other ways that the Illinois agency could reduce  fraud using existing quality control efforts that are already required by federal law.  Both the Payment Error Rate Measurement and the Medicaid Eligibility Quality Control  initiatives require state agencies to sample eligibility determinations to find weaknesses in the  process.

Other efforts by state legislatures to solve problems with Medicaid have led to costly litigation and injunctions to Medicaid agencies against implementation of the legislature’s efforts.  For example, the California legislature has tried several times to reduce the rates that Medicaid pays for services.  Each time, providers have sued and courts have enjoined the agency from  implementation of the changes. The basis for the injunction was the state’s failure to consider the effect of the rate cuts on beneficiaries’  access to covered services as required by Social Security Act section 1902(a)(13) and(30). This litigation is now pending in the United States Supreme Court.

Similarly, in an attempt to curtail Medicaid fraud, Congress passed a requirement for Medicaid applicants and recipients to document their U.S. citizenship in the Deficit Reduction Act of 2005 (P.L. 109-171).  As written, the law required documentation from nearly everyone, including newborns the agency knew were citizens because Medicaid had covered their birth. As a result, enrollment declined in several states as eligible individuals faced obstacles in obtaining documents that were acceptable under the law. Eventually, section 211 of  the Children’s Health Insurance Program  Reauthorization Act (CHIPRA) (P.L. 111-3) placed the burden of obtaining documentation on the state agencies because they have access to electronic data bases of other agencies.

How should legislatures be involved in setting Medicaid policy? How should the  federal government enforce federal Medicaid law when a state legislature has imposed a requirement that seems reasonable?  Tell us what you think.