What’s Behind CMS’ Denial of Maine’s Medicaid Proposal?

On August 1, 2012, Maine state officials sent CMS a challenge by submitting a proposed amendment to the state’s Medicaid plan that would have violated the “maintenance of effort” (MOE) provisions of the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148). The maintenance of effort requirement in Soc. Sec. Act sec. 1902(gg), added by PPACA section 2001(b)(2), provides that state Medicaid programs may not use eligibility standards more restrictive than those that were in effect on March 23, 2010, the date PPACA was enacted. The MOE applies to coverage of adults until the state’s health insurance exchange is operational in 2014; eligibility for children may not be cut back until October 1, 2019. The law provided for an exception,which we’ll discuss below. Maine’s proposed state plan amendment (SPA) included three changes to eligibility:

  1. reducing the income limits for payment of Medicare cost sharing for dual eligibles (individuals eligible for both Medicare and Medicaid) in each of three categories by 10 percent of the federal poverty level (FPL);
  2. eliminating eligibility for individuals aged 19 or 20 unless they had been in foster care on their 18th birthday; and
  3. reducing the income limit for adults who are neither pregnant nor disabled to 100 percent of FPL without providing transitional assistance under Soc. Sec. Act sec. 1931.

There were problems with two of the three proposals. The eligibility of the 19- and 20-year olds was based on their status as children, and their eligibility was protected until 2019.The exception that would allow a state to reduce eligibility limits applies to adults with incomes greater than 133 percent of FPL. By reducing the limit for parents and caretaker relatives to 100 percent of FPL, Maine’s proposal made deeper cuts than PPACA allowed.

Maine’s proposed SPA was submitted with an ultimatum. Included with Maine’s proposal was a ten-page argument by Mary Mayhew, Commissioner of the state’s Department of Health and Human Services, stating the reasons that CMS was “required” to approve the amendment.

First, when PPACA was passed, state Medicaid programs were already subject to MOE under the American Recovery and Reinvestment Act (ARRA) (P.L. 111-5) as a condition of receipt of the temporary increase to federal matching funds during the recession. That MOE froze standards as they existed in 2008. Mayhew contended that states had a choice whether to keep their 2008 standards in effect, because only the temporary increase was at stake. But, in effect, PPACA’s MOE extended the 2008 standards long past the time that they were to expire. States were not given a choice about it, and there was no increase in federal funding to pay for it. Mayhew gave several examples of Maine’s history of generous income limits and described many other measures that the state had taken to over come its deficit. She established that the legislature had required this change, and she enclosed the necessary certification of an anticipated budget shortfall.

But then the supporting letter argued that the MOE was unconstitutional because it was part of the Medicaid expansion, which, Mayhew said, the Supreme Court ruled was unconstitutional in National Federation of Independent Businesses v. Sebelius. But that’s not exactly what the Court ruled.  Certainly, that’s not the way the federal government understands the ruling. Rather, the court ruled that the federal government could not sanction a state for refusing the Medicaid expansion by withdrawing all funding for the state’s entire Medicaid program.

After adding this superfluous argument, Maine demanded an answer by September 1st, so that it could balance its budget by implementing the changes October 1, 2012. And the state threatened to sue if it didn’t get the answer it wanted by then (unless CMS picked up the tab for the beneficiaries it sought to drop), even though by statute the agency has 90 days to respond. A letter from Governor Paul LePage to HHS Secretary Kathleen Sebelius reiterated the constitutional argument and the threat to sue.

At the end of August, CMS had not finished considering the SPA. On September 5, 2012, the state took the matter to the First Circuit Court of Appeals. In less than ten days, the court dismissed the state’s claim as premature.

CMS rendered its decision on January 7, 2013. The SPA was split into two parts. The proposal to reduce the limits for dual eligibles was approved; even after the reduction, the income limits for these beneficiaries all exceed the statutory minimum. The proposal to eliminate coverage of 19- and 20-year olds was disapproved, both because the group was eligible as an extended group of children, and because the income limits were below 133 percent of FPL. As to the reduction  to the income limit for parents and caretaker relatives, CMS approved the reduction down to 133 percent of FPL, but not below. Maine will not be required to provide transitional assistance  to parents or caretaker relatives under section 1931.

Acting CMS Administrator Marilyn Tavenner responded in detail to Maine’s interpretation of the Supreme Court ruling. In addition to explaining the ruling limiting the enforcement of the Medicaid expansion, Tavenner noted that the income limits the state sought to roll back had been in place well before ARRA was enacted. Maine had covered parents and caretaker relatives with incomes up to 150 (or 200, the documents differ) percent of FPL since 2005, and had covered 19- and 20-year olds at its current income level since 1991.