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Medicare Compliance & Reimbursement

MEDICAID:

Caps? Medicaid Already Wearing Them

Published on Thu Mar 24, 2005

Advocates: More cuts could be coming, and the infirm will suffer.

If Congress enacts a budget resolution requiring major Medicaid cuts, advocates for the poor and disabled, as well as some lawmakers, worry that the government will place hard caps on some federal funding for the program.

In fact, however, state Medicaid programs already operate under caps, which states have negotiated in the course of gaining federal waivers to redesign their programs, a Senate Republican aide noted at a March 29 forum in Washington. Twenty-nine states are operating under per capita funding caps and 11 under aggregate spending caps for some portions of Medicaid, the aide said. 

In addition, the federal Centers for Medicare and Medicaid Services is pressing states to give up various sort-of-shady-but-legal schemes they've used over the years to pull down more federal matching funds than federal officials believe the spirit of Medicaid law permits. As states abandon these so-called Medicaid maximization or enhancement mechanisms, more will opt for waivers as a means of protecting state budgets in an era of rising costs, many analysts believe.

It's longstanding policy that so-called 1115 Medicaid waivers must be "budget neutral" for the federal government, Georgetown University Health Policy Institute research professor Cindy Mann explained last September in an analysis of New Hampshire's current Medicaid-overhaul proposal. This means that, before granting a waiver, the federal Department of Health and Human Services must determine that approval won't end up costing the federal government more money.
 
Bottom line, according to Mann: Waivers offer states much-desired individual flexibility to design their programs. However, "whether or not a state is planning an expansion or other improvements under its waiver, the federal government has required states to accept a cap on the amount of federal funds that will be paid ... for all waiver-related expenditures."

"Even when a state is planning to use a waiver to reduce spending, the federal government insists on a cap," according to Mann. "For example, Washington state recently sought a waiver to impose premiums on children." Since the waiver was proposed as a way to bring in revenue from individuals and possibly discourage use of the program by those who didn't want to or couldn't afford the premiums it was, by definition, a cost cutter, Mann wrote. On that basis, the state initially sought a waiver with no budget-neutrality cap. "A cap was ultimately imposed, however."

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